15 Nov 2023
Contributing extra money into superannuation offers numerous benefits, serving as a strategic move for individuals looking to boost their superannuation balance. However, the landscape of superannuation contributions comes with its intricacies, and one significant consideration for high-income earners is the impact of Division 293.
Extra superannuation contributions can help individuals take advantage of the concessional tax treatment within the superannuation system. Concessional contributions, which include both employer contributions and personal contributions claimed as a tax deduction, are taxed at a lower rate of 15% within the fund. This compares favourably to the marginal tax rates that apply to income outside the superannuation environment, making it a tax-effective strategy for wealth accumulation.
However, it's crucial for high-income earners to be mindful of Division 293 when contemplating additional superannuation contributions. This division was introduced to address the perceived inequity in the tax benefits received by individuals with higher incomes. Once an individual's Division 293 income and concessional contributions exceed the set threshold (currently $250,000), an additional 15% tax is levied on the concessional contributions.
While contributing extra money into superannuation can be a tax-efficient strategy, high-income earners must navigate the additional tax implications introduced by Division 293.