RBizz Corporate Accountants - Resources #Business Tax

Div 293 Tax: What High-Income Business Owners Need to Know About Extra Super Tax

Thu, 23 Jul 2026 13:06:20 +1000

Div 293 Tax: What High-Income Business Owners Need to Know About Extra Super Tax

Superannuation contributions are generally taxed concessionally — one of the reasons they're such a widely used part of personal and business tax planning. But once income crosses a certain threshold, an additional tax applies specifically to that concessional treatment. That's Division 293, and it catches a meaningful number of business owners, directors, and CFOs who don't realise it applies until it shows up on their assessment.

What Division 293 Actually Does

Division 293 imposes an additional tax on concessional (before-tax) superannuation contributions for individuals whose income, combined with those contributions, exceeds a specified high-income threshold. In practical terms, once you're above that threshold, a portion of your super contributions — which would otherwise be taxed at the standard concessional rate — is taxed at an additional rate on top of that.

This isn't a penalty in the sense of a compliance failure. It's a deliberate design feature of the system, intended to reduce the size of the tax concession available to high-income earners on their super contributions, without removing the concession entirely.

Why Business Owners Are Particularly Exposed

Business owners and directors are more likely than the average employee to encounter Division 293, because:

Income for Division 293 purposes includes more than salary — it generally captures a broader definition of income, including certain business and investment income, not just PAYG wages.
Owners drawing a mix of salary and dividends may not immediately realise how their combined income interacts with the threshold, particularly in a strong trading year.
Directors making large concessional contributions — for example, catching up on unused concessional caps from prior years — can inadvertently push themselves well above the threshold in a single year.
CFOs and senior executives with performance-based remuneration can experience significant year-to-year income variability, meaning Division 293 exposure isn't always predictable from one year to the next.

How the Additional Tax Is Actually Assessed

Division 293 tax isn't withheld automatically the way standard super contributions tax is. Instead, it's assessed separately, generally after your income tax return is processed, based on the combined income and contribution information reported to the ATO. This means many business owners don't see the liability coming until an assessment notice arrives — sometimes well after the relevant contributions were made and the cash flow moment has passed.

What to Do If You're Likely Affected

Estimate your combined income (including the broader Division 293 definition) before the end of the financial year, rather than relying solely on salary or wages as the reference point.

Model concessional contributions against the threshold in advance, particularly if you're planning to use unused carry-forward concessional cap amounts in a single year.

Set aside funds for the additional tax liability, since it's assessed separately and can arrive as an unexpected bill if not anticipated.

Consider the timing of large one-off contributions, since bunching several years' worth of catch-up contributions into a single high-income year can trigger a larger Division 293 liability than spreading them across multiple years.

Review this alongside your overall remuneration strategy, since salary, dividends, and superannuation contributions all interact with your total taxable position — not just your super contributions in isolation.

A Planning Issue, Not Just an Assessment Surprise

Division 293 isn't something that can be avoided through better paperwork — it's a function of income level and contribution timing. But it is something that can be planned for, particularly around the timing of larger contributions and the overall structure of how a business owner draws income from their business.

Understand Your Exposure Before It Shows Up on an Assessment

If your personal income — including business income, dividends, and super contributions — is likely to sit above the high-income threshold, it's worth reviewing your position before the financial year closes, rather than after an assessment notice explains why an additional amount is owed.

RBizz reviews personal and business income structuring to help you understand and plan for Division 293 exposure — schedule a free consultation to check your position.

Payroll Tax Grouping Rules: When Related Businesses Get Taxed as One

Thu, 16 Jul 2026 19:52:46 +1000

Payroll Tax Grouping Rules: When Related Businesses Get Taxed as One

Many business owners run more than one entity — a trading company, a related service business, perhaps a property-holding entity or a business run with family members. Individually, each might sit comfortably under the payroll tax threshold. Together, they may not.

That's the risk payroll tax grouping rules create, and it's one of the more commonly misunderstood areas of state tax compliance. Businesses that assume "we're separate entities, so we're fine" are often surprised to learn the revenue office may see it differently.

What Payroll Tax Grouping Actually Means

Payroll tax is a state-based tax (not federal), and each state and territory sets its own threshold and rate. Normally, a business only pays payroll tax once its total Australian wages exceed that state's threshold.

Grouping rules exist to prevent businesses from avoiding payroll tax by splitting operations across multiple entities that are, in substance, run as one business. When entities are "grouped," their combined wages are assessed against a single threshold — not each entity's wages assessed separately.

In practice, this means two or three businesses that each individually sit under the threshold can, once grouped, collectively exceed it — creating a payroll tax liability that didn't seem to exist when each entity was viewed in isolation.

The Situations That Commonly Trigger It

Division 7A doesn't only apply to obvious "loans." It can be triggered by:

Informal director loans — money taken from the company account for personal use without a loan agreement in place.
Use of company assets — a director using a company-owned property, vehicle, or other asset without paying market value for that use.
Debt forgiveness — the company writing off an amount owed by a director or associate.
Payments to associated entities — not just the director personally, but related trusts, family members, or other related businesses.
Unpaid present entitlements (UPEs) — trust distributions owed to a corporate beneficiary that remain unpaid can, in some circumstances, also fall within Division 7A's scope.

The common thread is simple: value has left the company and reached a shareholder or associate, without being properly taxed as a dividend, salary, or a compliant loan.

How to avoid the problem

The good news is that Division 7A is entirely manageable — it's a compliance issue, not an unavoidable tax cost, provided it's addressed at the right time.

1. Put a complying loan agreement in place

If money is genuinely intended to be a loan, it needs a written agreement that meets specific requirements — including a market interest rate and a maximum loan term — put in place before the company's tax return lodgment date for the year the loan was made.

2. Make minimum yearly repayments

A complying Division 7A loan requires minimum repayments each year, covering both principal and interest. Missing a minimum repayment can trigger a deemed dividend for the shortfall.

3. Pay for personal use of company assets at market value

If a director uses a company asset personally, charging (and actually paying) a market rate for that use avoids the issue arising in the first place.

4. Deal with unpaid trust entitlements correctly

Where a trust owes an unpaid distribution to a corporate beneficiary, specific sub-trust or loan arrangements may be needed to keep the arrangement compliant.

5. Review before lodgment, not after

Because the compliance window is generally tied to the lodgment date of the company's tax return, informal withdrawals from earlier in the year can often still be fixed — but only if they're identified and addressed before that return is lodged.

Why This Gets Missed So Often

Division 7A issues usually don't come from deliberate tax avoidance. They come from:

A director treating the company bank account like a personal one, especially in owner-operated businesses
Assuming an informal understanding ("I'll pay it back eventually") is enough
Not realising trust distributions to a company can also be caught by the rule
Discovering the issue during a tax return review, after the compliance window has already closed

The Cost of Getting This Wrong

If Division 7A applies and nothing is done to fix it, the amount involved can be treated as an unfranked dividend in the relevant shareholder's hands — increasing their personal tax liability, often unexpectedly, and sometimes for an amount they no longer have on hand because it was spent long before the tax return was prepared.

Catch It Before It Costs You

If your company has ever paid for a director's personal expenses, let a director use a company asset, or has unpaid trust distributions sitting on the books, it's worth a proactive Division 7A review — ideally well before your company's tax return is due.

RBizz reviews director loans, trust distributions, and related-party transactions before they become a tax problem — schedule a free consultation to check your company's position.