If your income plus your concessional super contributions cross $250,000 in a year, the tax advantage of salary sacrificing into super shrinks. Division 293 charges an extra 15% on the contributions that pushed you over the line, and a lot of high-earning FIRE planners run into it without ever seeing it coming, because it arrives as a separate ATO notice months after the financial year ends rather than on a payslip.
This post covers where the $250,000 threshold sits, exactly what the ATO counts toward it, how the liability is calculated, and the two levers that shift the maths: spouse super splitting and choosing non-concessional over concessional contributions once you are over the line.
The short version
What Division 293 actually is
Concessional contributions, the salary-sacrifice and employer-Super-Guarantee dollars that go into super before tax, are normally taxed at 15% inside the fund. For most working Australians that is a large saving against a marginal rate of 30%, 37% or 45%. Division 293 reduces that saving for high earners by adding a second 15% charge on top of the standard 15%, so the contributions caught by it are effectively taxed at 30% rather than 15%.
The threshold is $250,000. The additional rate is 15%. Both have been fixed since the 2017-18 income year. Unlike the contribution caps, which step up with wage growth, the Division 293 threshold is not indexed, so every year of wage inflation pulls more people across the line. The ATO publishes the operating rules on its Division 293 tax page.
What counts toward the $250,000
This is the part that trips people up. The test is not your taxable income on its own. The ATO defines Division 293 income as your income for surcharge purposes plus your low-tax contributions (broadly, your concessional contributions). The income side includes more than salary:
- Taxable income (after deductions)
- Total reportable fringe benefits
- Net financial investment loss and net rental property loss
- Net amount on which family trust distribution tax has been paid
- Reportable super contributions are folded in via the low-tax contributions figure, not the income figure, so they are not double counted
The practical consequence is that two people on the same base salary can land on opposite sides of the threshold. Someone negatively gearing a rental property reduces their taxable income but the net rental loss is added back for the Division 293 test, so the negative gearing does not help them dodge it. The exact components are listed on the ATO Division 293 page.
How the liability is calculated
Division 293 taxes the smaller of two numbers: the amount your Division 293 income exceeds $250,000, or your low-tax (broadly concessional) contributions for the year. The 15% rate applies to whichever is lower. That structure matters, because it means the tax never applies to contributions you did not actually make.
Worked example: Priya at $260,000
Priya is 44, earning a $235,000 salary, and salary sacrifices enough to use her full $30,000 concessional cap (employer Super Guarantee plus voluntary salary sacrifice). Her Division 293 income is her salary-derived taxable income plus her concessional contributions.
| Step | Calculation | Result |
|---|---|---|
| 1. Taxable income | Salary less the $30,000 concessional contributions | $230,000 |
| 2. Add concessional contributions | $230,000 + $30,000 | $260,000 |
| 3. Excess over $250,000 | $260,000 − $250,000 | $10,000 |
| 4. Lesser of excess or contributions | min($10,000, $30,000) | $10,000 |
| 5. Division 293 tax | $10,000 × 15% | $1,500 |
Only $10,000 of Priya's $30,000 in contributions is caught, because she is only $10,000 over the threshold. Those $10,000 are effectively taxed at 30% (the standard 15% inside the fund plus the 15% Division 293 charge) instead of 15%. The other $20,000 still enjoys the full 15% concessional rate.
Worked example: Sam well over the line
Sam is 49, earning $320,000, and uses the full $30,000 cap. His Division 293 income is roughly $320,000, which is $70,000 over the threshold. Because the excess ($70,000) is larger than his contributions ($30,000), the tax applies to the smaller number, his full $30,000 of contributions.
| Step | Calculation | Result |
|---|---|---|
| 1. Division 293 income | Taxable income + concessional contributions | ~$320,000 |
| 2. Excess over $250,000 | $320,000 − $250,000 | $70,000 |
| 3. Lesser of excess or contributions | min($70,000, $30,000) | $30,000 |
| 4. Division 293 tax | $30,000 × 15% | $4,500 |
For Sam, every dollar of concessional contribution is taxed at 30% rather than 15%. The contributions still beat taking the same money as salary taxed at his 47% marginal rate (45% plus the 2% Medicare levy), but the margin is narrower than the headline super pitch suggests. The arbitrage is 30% inside super versus 47% outside, not 15% versus 47%.
Why FIRE planners run into it more than most
Division 293 is a problem of the top few per cent of earners, which sounds like it should be rare. The FIRE cohort is over-represented for two structural reasons.
- High savings rates concentrate in high earners. The people most able to retire a decade or two early are usually the ones earning enough to save 40% or more of their income. That earning power is exactly what tips Division 293 income over $250,000.
- Maxing the concessional cap is the standard play. FIRE planners are far more likely than the general population to use the full concessional cap every year, and those contributions are added to income for the Division 293 test, so the strategy that builds the super balance is the same strategy that triggers the tax.
A single high earner around $230,000 of salary who salary sacrifices to the cap is already over the line. A FIRE planner deliberately front-loading super before an early retirement is the textbook Division 293 case.
Two levers that change the maths
Division 293 is one of the more plannable super taxes, because the threshold is a personal test and contributions are a choice. Two levers do most of the work.
Spouse super splitting
Division 293 applies per person, not per household. A couple where one partner earns $300,000 and the other earns $60,000 can have a very different combined Division 293 bill depending on how the super contributions are arranged.
Contribution splitting lets the higher earner transfer up to 85% of a financial year's concessional contributions to their spouse's super account, usually applied for in the year after the contributions were made. The split itself does not change who is assessed for Division 293 in the contribution year (the contributions are first counted against the original member), but over time it shifts the balance toward the lower-earning partner, whose own contributions are nowhere near the threshold. The ATO explains the mechanics on its contribution-splitting page.
The household angle that matters for early retirement is balance, not just tax. Two roughly equal super balances also help a couple each stay under the $3 million Division 296 threshold later, and they give both partners their own tax-free pension allocation up to the Transfer Balance Cap in retirement. Spouse splitting is a slow lever, but compounded across a decade of accumulation it reshapes both the Division 293 exposure now and the Division 296 exposure later. The Division 296 post walks the $3m side of that trade.
Non-concessional over concessional, once over the line
Once Division 293 is unavoidable on the next concessional dollar, the comparison changes. A concessional contribution caught by Division 293 is taxed at 30% on the way in. A non-concessional contribution is made from already-taxed money, so it is not taxed again inside the fund, but it also gives no deduction.
For someone whose every concessional dollar is hit by Division 293, the choice on the next contribution is roughly: 30% tax now via concessional, or marginal-rate tax already paid via non-concessional with no further deduction. For a top-bracket earner that comparison usually still favours concessional up to the cap, because 30% beats the 47% they would otherwise pay, but the gap is small enough that non-concessional contributions, or a non-super investment with the structural benefits of liquidity, become genuinely competitive. That is a narrower margin than the default rule of thumb that concessional always wins, which is why a Division 293 earner is the case where modelling both paths side by side changes the answer most.
What Division 293 doesn't change
It is easy to read about a second 15% charge and conclude that super stops being worth it above $250,000. The numbers say otherwise for most high earners.
- Concessional contributions taxed at 30% under Division 293 still beat the same income taken as salary and taxed at a 47% top marginal rate. The arbitrage compresses; it does not disappear.
- Earnings inside the fund are still taxed at 15% in accumulation and 0% in pension phase up to the Transfer Balance Cap, unless you are also above the separate $3 million Division 296 threshold. Those are different taxes with different thresholds.
- The bridge between an early-retirement date and preservation age is funded by non-super wealth regardless of Division 293. Nothing about this tax changes how the bridge years work. The bridge-to-super post covers that side.
Try it yourself
See where your plan crosses $250,000
ProjectFi's engine models Division 293 on your projected income and contributions, so you can see in which years the extra 15% applies and how spouse splitting or a non-concessional shift changes the after-tax outcome.
Open the plannerThe bottom line
Sources
- ATO, Division 293 tax (threshold of $250,000, additional 15% rate, Division 293 income definition, and the lesser-of-excess-or-contributions rule)
- ATO, splitting super contributions with your spouse (the up-to-85% concessional split mechanic)
- ATO, non-concessional contributions cap (the $120,000 annual cap, $360,000 bring-forward, and Total Super Balance interaction)
- ProjectFi methodology: super contributions (how the engine applies Division 293 inside a projection)