How to Reduce Division 293 Tax in Australia

Key takeaways

• Division 293 usually cannot be avoided if you exceed the $250,000 threshold.
• The rules are mechanical and leave little room for discretion.
• Some decisions affect whether it applies and how much is payable.
• Every lever involves a trade off.

People often ask this question after receiving a notice. Can I reduce Division 293 tax, or at least stop it happening again?

The honest answer matters here. Division 293 is designed to apply once you cross a clear threshold. There are no loopholes. But there are choices that influence the outcome.

If you want to get a quick sense of how close you are to the threshold, use the Division 293 calculator to run an estimate before you change anything.

This guide explains what you can control, what you cannot, and the compromises involved.

Start with the basics

Division 293 applies when your income plus concessional contributions exceed $250,000 in a financial year.

The extra tax is 15 percent of the amount above the threshold or your taxable super contributions, whichever is lower. The ATO applies the rule automatically once it has your tax return and contribution data.

If you want the full explanation and examples, start here
Division 293 tax explained

What you cannot control

It helps to be clear about the limits first.

There is no discretion

Unlike excess contributions rules, there is no discretion to ignore, reallocate, or waive contributions for Division 293 purposes.

If you successfully have excess concessional contributions disregarded or reallocated, they are still counted when working out Division 293.

One off income years still count

Division 293 is assessed year by year.

A capital gain, bonus, or back payment can trigger it even if your income usually sits well below $250,000. The fact that it is unusual or non recurring does not matter.

Threshold creep exists

The $250,000 threshold has not been indexed. As incomes rise, more people fall into Division 293 over time. There is nothing you can do about that.

What you can influence

While the rules are blunt, a few levers can change the outcome at the margin.

Concessional contribution levels

Reducing concessional contributions reduces the amount exposed to Division 293.

This can help in years where you are only slightly above the threshold. It can also eliminate Division 293 entirely if the combined total drops below $250,000.

The trade off is obvious. You save tax today but build less in super. For many people, super remains attractive even with Division 293 applied.

Timing of income where possible

Some income is flexible. Some is not.

Examples where timing may be influenced include:

• Discretionary bonuses
• Equity vesting dates
• Asset sales

Spreading income across financial years can sometimes keep you below the threshold in a single year. This depends on personal circumstances and is often limited.

Deductible contributions and deductions

Claiming deductions can reduce taxable income, which may affect the Division 293 calculation.

This is not a strategy in itself. It is simply a reminder that accurate reporting matters. Overstated income can push you into Division 293 unnecessarily.

Why reducing super is not always the right answer

A common reaction is to stop making concessional contributions once Division 293 applies.

That can be short sighted.

Even with Division 293, concessional contributions are often still taxed at a lower rate than personal income. The benefit is smaller, but it does not disappear.

The right question is not how to avoid Division 293 at all costs. It is whether the after tax outcome still makes sense for you.

Defined benefit members

Defined benefit members face additional constraints.

Division 293 for defined benefit funds uses notional contributions. You usually cannot change or reduce these amounts. In many cases, the tax is deferred rather than avoided.

This is one area where trying to optimise rarely helps. Understanding the mechanics is more important than chasing a reduction.

For a clearer explanation, see
Division 293 for defined benefit members

Paying personally vs paying from super

How you pay the tax can matter more than whether it applies.

Paying personally preserves your super balance. Paying from super helps cash flow but reduces retirement savings.

Neither option reduces the tax itself. But the choice affects your long term outcome.

The mechanics are explained here
Paying Division 293 from super

Common planning mistakes

• Stopping all concessional contributions without doing the maths
• Assuming Division 293 applies to all contributions
• Ignoring one off income when planning
• Treating Division 293 as a penalty rather than a rule

Most of these mistakes come from reacting emotionally instead of stepping back.

FAQs

Can you avoid Division 293 tax?

In most cases, no. If your income plus concessional contributions exceed $250,000, Division 293 generally applies without discretion.

Does reducing concessional contributions stop Division 293?

Reducing concessional contributions can reduce or remove Division 293 in some cases, but it also reduces super savings and may not be appropriate.