Starting July 1st 2017, more Australians will pay double contributions tax (15% + 15%) because of the lowering of the income threshold from $300,000 to $250,000. Those with adjusted taxable income of over $250,000 will have extra contributions tax and all concessional contributions will have 30% tax instead of 15%. Those in certain public sector funds will be hit with this extra tax which will raise $2.5 billion in four years.
According to the explanatory memorandum of the legislation, “lowering the threshold at which the Division 293 tax applies ensures that the tax concession provided to those on high incomes is more closely aligned with the tax concession provided to low and middle-income earners”.
Effective from July 1st, the income threshold for imposing extra contributions tax will be reduced to $250,000. The Division 293 tax is an extra 15% tax, payable on concessional contributions made by taxpayers with an ‘income for surcharge purposes’ of more than $300,000.
The regular 15% contributions tax when a super contribution is processed by a super fund is applicable to all concessional contributions of taxpayers with an ‘income for surcharge purposes’ of both $300,000 or less and $300,000 or more.
Until June 30th 2017, those with an ‘income for surcharge purposes’ of over $300,000 in a financial year now pays 30% tax on concessional contributions. It doubles the super contributions tax bill for high-income earners. Note that you can pay the Division 293 tax from your own private savings or through your super fund.
For more information about Division 293 or superannuation in general, contact a Chan and Naylor office near you to discuss your particular circumstances.
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