Sam Greco & Co News, Apr 2014

DIVISION 293

Friday 4th April, 2014 (2:16 am)

In the budget of May 2013 it was announced that high income earners would lose access to some of the tax concessions for Superannuation purposes.  Division 293 sees an additional 15% (added to the standard 15% tax) on superannuation income.  Individuals with an ADJUSTED income over $300,000 will have the option of pay this Division 293 tax personally or from their superannuation fund.

The ADJUSTED income comprises of:

  • Your taxable income (from your Income Tax Return – ITR/Notice of Assessment NOA)

  • Total reportable fringe benefits amounts (on ITR)

  • Net financial investment loss (on ITR)

  • Net rental property loss (on ITR)

  • Amounts on which family trust distribution tax has been paid (on ITR)

  • *Low tax contributions (from Superannuation Fund)

  • Super lump sum taxed elements with a zero tax rate (on ITR)

*Low tax contributions information is obtained from the superannuation fund and equals the member’s contribution statement.  This includes amounts from:

  • Employer Contributions amounts

    • Super guarantee

    • Salary sacrifice

  • Other family and friend contributions

  • Assessable foreign fund amounts

  • Assessable amounts transferred from reserves

  • Notional employer contributions (defined benefit contributions)

Example calculation:

John

        Taxable Income per ITR/NOA                  265,000

        Superannuation Paid   by employer          16,000

        Salary sacrificed super                                   9,000

        Rental property losses                                  18,000

        Total Earnings for Div 293                           308,000

The income in excess of $300,000 is taxed a further 15% ð $8,000 x 15% = $1,200

If John chose not to salary sacrifice the $9,000, he would still have a Division 293 tax issue - he would pay 46.5% tax + 1.5% Medicare levy on the $9,000 plus the 15% on the $8,000.  He is still saves considerable in regards to taxation if he salary sacrifices but not as much as he would have prior to Division 293 introduction.

 

Cassandra

Taxable Income per ITR/NOA                  285,000

        Superannuation Paid   by employer              16,000

        Salary sacrificed super                                8,000

        Adjusted Reportable Fringe Benefit             20,000

        Rental property losses                                  12,000

        Total Earnings for Div 293                           341,000

For Cassandra, Division 293 allows use of the lower of two amounts:

·         Low tax contributions $24,000 ($16,000 + $8,000) or

·         The excess over $300,000 ($41,000)

Therefore Cassandra’s Division 293 tax would be $24,000 x 15% = $3,600.

NB:  If Cassandra’s fringe benefit can be “cashed out” (i.e. cancelled out by an employee contribution) she may be able to reduce the total earnings by $20,000.  If you have a novated lease or cashable item which you are salary sacrificing, and you are in the Division 293 category of tax payers, please TALK TO YOUR ACCOUNTANT.

Payment of Divison 293 Tax

Division 293 tax is due 21 days after the notice of assessment is issued.  This is payable by:

·         The individual.

·         A division 293 tax release authority.  This will be issued with the notice of assessment allowing payment through the superannuation fund using members contribution, or

·         Splitting the payment between the two options.

NB:  Defined benefit funds are treated slightly different and you should talk to your accountant regarding these.

Websites:

How to calculate:

http://www.ato.gov.au/Tax-professionals/News-and-updates/Practical-tips/How-Division-293-tax-is-calculated/

General information:

http://www.ato.gov.au/Individuals/Super/In-detail/Contributions/Division-293-tax---information-for-individuals/

Produced by Sam Greco & Co

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