What you need to know before paying SMSF tax
If you plan to pay from your SMSF, it’s important to wait for a key green light. BDO accountant Agnes Dayao outlines what you need to remember.
When you receive a Division 293 tax assessment, you can choose to pay the amount personally or pay the amount from your superannuation fund, including a self-managed superannuation fund (SMSF), using the approved Australian Taxation Office (ATO) process.
If you plan to pay from your SMSF, it’s important to wait until the ATO issues an official Release Authority. Making a payment before this document is issued is considered illegal early access to superannuation and may result in penalties.
What is Division 293 tax?
Division 293 tax is an additional tax on superannuation contributions for individuals whose income plus concessional (before-tax) super contributions exceed $250,000 in a financial year. If this applies to you, you may be required to pay an extra 15 per cent tax on some of your super contributions.
Who does this affect?
Your Division 293 income includes taxable income, fringe benefits, investment and rental losses, and other relevant amounts. You may need to pay Division 293 tax if this amount, together with your concessional super contributions, exceeds $250,000 in a financial year.
How is Division 293 tax calculated?
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Division 293 tax is calculated at 15 per cent of the lower amount of:
- the amount by which your income plus concessional contributions exceeds $250,000, or
- your taxable super contributions (such as employer contributions, super guarantee, salary sacrifice and deductible personal contributions).
Division 293 tax: Example calculation
| Item | Amount |
|---|---|
| Division 293 income | $270,000 |
| Concessional super contributions | $30,000 |
| Total | $300,000 |
| Calculation step | Outcome |
|---|---|
| Amount above $250,000 threshold | $50,000 |
| Lesser of excess ($50,000) or contributions ($30,000) | $30,000 |
| 15 per cent Division 293 tax | $4,500 |
How will you know if you need to pay?
You will receive an “Additional tax on concessional contributions (Division 293)” notice from the ATO after your personal tax return and your super fund’s contribution details have been processed.
How to pay
Once the ATO issues your Division 293 notice of assessment, you can pay the tax:
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- From your own money, or
- From your super, by lodging the ATO’s Release Authority form. Your superannuation fund will then pay the ATO directly.
There is a strict due date for payment. If the tax is not paid on time, the ATO may apply interest or penalties.
Important warning for SMSF members
- The ATO makes it clear that you are responsible for paying Division 293 tax by the due date shown on your assessment.
- You have 60 days to elect to release super funds, but this does not extend or change the payment due date.
Do not pay from your SMSF too early
If you choose to have your SMSF release money to the ATO, the SMSF must not make the payment until both of the following have occurred:
- You have lodged your election with the ATO to release money from super; and
- The SMSF has received the ATO Release Authority.
You will know the Release Authority has been received when your SMSF tax agent or administrator confirms that the SMSF is authorised to make the payment.
Why this matters
If the SMSF releases the money before the ATO issues the Release Authority:
- The payment may be treated as a breach of superannuation law;
- The trustees may face penalties;
- The payment may need to be reversed and re-processed, creating delays and additional work.
Key reminders before paying
- You can pay your Division293 tax personally, or request the amount be released from your SMSF.
- If you choose to pay the tax from your SMSF, the election form must be lodged and approved by the ATO.
- Once approved, the ATO will issue a Release Authority directly to your SMSF.
- Do not make any payment from your SMSF until the Release Authority has been received.
- Paying from your SMSF too early may be treated as illegal early access to superannuation.
- The ATO may impose penalties or fines if the correct process is not followed.
How BDO can help
If you need guidance on your requirements or next steps, your BDO adviser is available to assist before you take action.
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