You did the sensible thing, put extra into super, and then a notice from the ATO arrives asking for a tax you have never heard of. Division 293 is that tax. It is the government quietly winding back some of the super break for higher earners, and while the name is intimidating, the rule underneath is narrow and worth understanding before it surprises you.
What it actually is
Normally the money you put into super from your before-tax pay, your employer's contributions and anything you salary sacrifice, is taxed at just 15% going in. That flat 15% is the whole point of super for most people: it is far below the rate your salary is taxed at. Division 293 adds a second 15% on top of those same contributions for people over a certain income, so the affected money is taxed at 30% instead of 15%.
It is still a concession. 30% inside super is less than the rate a high earner pays on their top dollar of salary. But it is half the break everyone else gets, and that is the part that stings.
It is a second 15% on your before-tax super, not on your whole income. That distinction is the difference between a small bill and a scare.
The $250,000 line
Division 293 kicks in when two things added together pass $250,000 in a year: your income for this purpose, and your before-tax super contributions. The threshold has sat at $250,000 since July 2017 and is not indexed, so it does not creep up with inflation.
The catch is what "income" means here. It is broader than your salary. It starts with your taxable income and then adds back things the tax system otherwise lets you reduce it with:
Then comes the second half of the sum. To that income figure the test adds your before-tax super contributions for the year, the employer and salary-sacrifice money going in. It is the two together that are measured against $250,000, which is why a large salary sacrifice can be the very thing that tips you over. Someone on a $230,000 salary who also negatively gears an investment and sacrifices into super can pass the line without ever earning a quarter of a million in wages.
What you actually pay
Here is the part most people get wrong, and it is good news. The extra 15% does not apply to everything. It applies to the lesser of two numbers: your before-tax super contributions for the year, or the amount by which your combined total sits above $250,000.
An example the ATO uses makes it concrete. Say your income for this purpose is $240,000 and your before-tax super contributions are $15,000. Your combined total is $255,000, which is $5,000 over the line. The extra tax applies to the smaller of $15,000 and $5,000, so $5,000. The bill is 15% of that: $750.
If you are $5,000 over on the combined total, only that $5,000 is caught, no matter how much super you put in. The bill is small.
Once your income alone is past $250,000, every dollar of before-tax super you add is caught, and taxed at the full 30%.
That is why the tax feels mild for people who nudge over the threshold and heavier for those already well above it on income alone.
Is salary sacrifice still worth it
Usually, yes, but with the shine taken off. The honest comparison is this: a dollar you salary sacrifice is taxed at 30% inside super once Division 293 applies. The same dollar taken as salary is taxed at your marginal rate, which at these income levels reaches 47% with the Medicare levy. A 30% impost still beats 47%, so the strategy generally keeps working. It just saves you less than the 15%-versus-47% gap that people below the threshold enjoy.
The catch worth naming: this is general information, not a recommendation to keep sacrificing at the same level. How much headroom you have in your contributions cap, your cash flow, and your other income all change the maths, and a one-off event like a capital gain or a redundancy payout can push you over for a single year without it being your normal pattern.
When the bill turns up
You do not calculate Division 293 yourself. The ATO works it out after two things have landed: your lodged tax return, and the contribution data reported by your super fund. Because the fund's report can arrive later than your return, the notice sometimes turns up weeks after you thought tax time was done, and occasionally as an amended figure if a second fund reports.
When it comes, you have a choice. You can pay it from your own money, or you can fill in a release authority and have the amount paid out of your super balance instead. Neither is automatic, so read the notice and pick, and pay by the due date to avoid interest.
Work out your tax and marginal rate for the year, so you can see how close to the $250,000 line you really are.
General information only, not financial advice. For a decision about your own super, check your figures against the ATO or a licensed adviser.