Two ATO letters catch people out. One says you have gone over your super contributions cap. The other says you owe Division 293 tax. They turn up months after the year has ended, they are set off by different things, and plenty of people get one without having done anything wrong.
The short version
Division 293 is a smaller discount, not a fine. If your income plus your before-tax super contributions clear $250,000, you pay an extra 15% on some of those contributions. Your super is taxed at 30% instead of the 47% you would pay taking the money as wages, so it is still the cheaper option. Being careful will not avoid it.
Going over the cap is usually a timing problem, and it is cheap to fix. The excess is added to your income and taxed at your rate, less a 15% credit for what your fund already paid. There has been no interest charge on it since 1 July 2021.
Ignoring the letter is what costs money. Do nothing and the excess gets counted a second time, against your after-tax cap. That is where the ATO’s “up to 94%” figure comes from.
Two letters, two different rules
People mix these two up constantly. They are set off by different things, and you can get both in the same year.
| What it is | What triggers it | What it costs |
|---|---|---|
| Division 293 tax | Your income plus your before-tax super contributions go over $250,000 in a year. | An extra 15% on some or all of those contributions. |
| Excess concessional contributions | Your before-tax contributions go over the cap. The cap is $32,500 from 1 July 2026. | The excess is added to your taxable income, less a 15% credit. |
There is a third one coming, Division 296, but it only applies if your total super balance is over $3 million and the first bills do not go out until the 2027-28 year. That one needs its own article.
Division 293: the one that catches high earners
Super contributions are taxed at 15% going into the fund, against up to 47% if you took the same money as wages. That gap is the whole point of putting money into super. Division 293 halves the gap once you earn enough. It does not close it.
The test adds two things together: your income for Division 293 purposes, and your before-tax super contributions. If the total clears $250,000, you pay an extra 15%.
The 15% is charged on the lower of two numbers: the amount you are over $250,000, and your before-tax contributions for the year. That second number is why someone barely over the line pays very little.
What counts as income for this
More than your salary. The ATO starts with the income figure it uses for the Medicare levy surcharge, then leaves out your reportable super contributions so they are not counted twice. What goes in:
- your taxable income, which is your assessable income less your deductions
- reportable fringe benefits
- net financial investment losses
- net rental property losses
- any amount on which family trust distribution tax has been paid
Two amounts come off rather than going on: super lump sum taxed elements taxed at nil, and assessable first home super saver amounts released to you.
Three people on the same salary
This is where it stops behaving the way people expect. All three earn $230,000 and all three get the same employer super. Everything else is different.
| Ann salary only | Ben salary sacrifices | Cate rental loss, work car | |
|---|---|---|---|
| Salary | $230,000 | $230,000 | $230,000 |
| Employer super | $27,600 | $27,600 | $27,600 |
| Salary sacrifice | nil | $4,900 | nil |
| Net rental loss | nil | nil | $20,000 |
| Reportable fringe benefits | nil | nil | $12,000 |
| Taxable income | $230,000 | $225,100 | $210,000 |
| Income counted (loss and car added back) | $230,000 | $225,100 | $242,000 |
| Super counted | $27,600 | $32,500 | $27,600 |
| Total for the test | $257,600 | $257,600 | $269,600 |
| Over $250,000 by | $7,600 | $7,600 | $19,600 |
| Division 293 tax | $1,140 | $1,140 | $2,940 |
Ben sacrificed $4,900 and his bill did not move a cent. The sacrifice came off his income and went straight back on as a contribution. Both sides of the test moved by the same amount, so salary sacrificing is no way under the threshold. It is still worth doing for other reasons. It just will not do this one.
Cate has the lowest taxable income of the three and the biggest bill. Her rental loss came off her taxable income and the ATO added every dollar of it straight back. The car added $12,000 on top of that. Negative gearing does not get you under $250,000, and a packaged car pushes you towards it.
The test runs one year at a time, so plenty of people pay Division 293 once and never again. Selling a property, a redundancy payout, back pay, or one very good year can be enough on its own. If that is you, it is a one off. Check the figures on the notice, then pay it and move on.
Two traps that surprise people
Use five years of saved up cap to make one big contribution and every dollar of it counts for Division 293, including the part above the normal annual cap. So the year you finally use that cap is the year you are most likely to cross $250,000. Work it out before you contribute.
With excess contributions you can ask the ATO to move or ignore an amount if your circumstances were unusual. There is no equivalent for Division 293. And if you do win that argument on excess contributions, the amount keeps its concessional treatment and goes straight back into the Division 293 sum. You can object if a number is wrong. You cannot object because the result feels harsh.
Going over the contributions cap
Before-tax contributions cover employer super guarantee, anything you salary sacrifice, and any personal contribution you claim a deduction for. They all land in the same bucket, and the bucket has a lid.
| Income year | Cap |
|---|---|
| 2026-27 | $32,500 |
| 2024-25 and 2025-26 | $30,000 |
| 2021-22 to 2023-24 | $27,500 |
| 2017-18 to 2020-21 | $25,000 |
Unused cap carries forward, and it applies itself
If your total super balance was under $500,000 on 30 June of the previous year, you can use unused cap from the past five years. Anything older than five years drops off.
You do not have to claim it. The ATO adds your saved up cap automatically the moment you go over the annual one. So if a determination has landed, it means the saved up cap was already used and there was still an excess on top.
What the excess actually costs you
The excess is added to your taxable income and taxed at your marginal rate. You then get a credit worth 15% of the excess, because your fund already paid 15% on the way in.
Put those together and you land almost exactly where you would have been if the money had been paid to you as wages. The 15% discount is taken back, and that is all.
Two bits of good news. Up to the 2020-21 year there was an interest charge on top of the tax, and it was scrapped from 1 July 2021, so anyone describing what this cost them years ago is describing a rule that has gone. And when the ATO works out your Division 293 contributions it takes the excess back out, so going over the cap does not make your Division 293 bill any bigger.
One knock-on to plan for. The excess is added to your income, so it can pull you into PAYG instalments, change instalments you already have, and flow through to your Medicare levy, any Centrelink payment and child support.
How you pay it
You can pay either bill from your own money, or have your super fund pay it. Having the fund pay is a form you lodge, and there is a clock on it.
Release the full 85% and none of the excess counts towards your after-tax cap. Release less than that, or nothing, and some or all of it does. If you are near that cap, or your balance is high enough that the cap is nil, that second count is where it gets expensive.
The rules on the election, in plain terms
- You have 60 days from the date on the determination. The option stays open in ATO online services for up to 120 days, and after that a late election is accepted or refused case by case.
- You make it through myGov: Super, then Manage, then Concessional election. Your tax agent can do it for you.
- Once made, it cannot be undone. There is no cooling off.
- Check the money is actually there first. Your fund has 10 business days to send it once the ATO issues the release authority.
- If you are in a defined benefit fund you may not be able to release anything at all. Check before you elect.
- If a fund cannot release the full amount, the ATO tells you and you get another 60 days to elect against a different fund.
Division 293 uses the same form, with one difference. Leaving a Division 293 bill alone just means you pay it yourself. Leaving an excess contributions bill alone is what triggers the second tax.
What it actually costs: four worked examples
All four use 2026-27 rates and thresholds. Jump to the one that looks like you.
1. Two jobs, no salary sacrifice
Dave has two roles, $150,000 and $130,000. He does not salary sacrifice a cent. Both employers pay super guarantee at 12%.
| Employer super, job one (12% of $150,000) | $18,000 |
|---|---|
| Employer super, job two (12% of $130,000) | $15,600 |
| Total before-tax contributions | $33,600 |
| Less the cap | $32,500 |
| Excess contributions | $1,100 |
| Tax on the excess at 47% | $517 |
| Less the 15% credit | $165 |
| Cap breach costs him | $352 |
Now the second notice. His income is $280,000 and his Division 293 contributions are $32,500, because the $1,100 excess is taken out. That is $312,500 in total, or $62,500 over the threshold.
| Amount over the $250,000 threshold | $62,500 |
|---|---|
| Before-tax contributions counted | $32,500 |
| Division 293 applies to the lower of the two | $32,500 |
| Division 293 tax at 15% | $4,875 |
Two letters, $5,227 in total, and Dave never put in a cent of his own. The cap breach cost him $352. The Division 293 bill was $4,875, and nothing he did with salary sacrifice would have changed it. This is the version we see most.
2. Salary sacrifice set too high
Priya earns $145,000 at one job. She sets up $20,000 a year of salary sacrifice because the cap is $32,500 and $20,000 sounded safely under it. She forgot her employer super counts in the same bucket.
| Employer super (12% of $145,000) | $17,400 |
|---|---|
| Salary sacrifice | $20,000 |
| Total before-tax contributions | $37,400 |
| Less the cap | $32,500 |
| Excess contributions | $4,900 |
| Tax on the excess at 32% | $1,568 |
| Less the 15% credit | $735 |
| She pays | $833 |
No Division 293 here. Her taxable income after sacrificing is $125,000, and adding $32,500 of contributions gets nowhere near $250,000.
She can release $4,165 from super to pay the $833. The fix is one number. Her employer super is $17,400, so her sacrifice can be $15,100 and no more. Changing it in July costs her nothing. Finding out in May does.
3. Big catch-up contribution, one form missed
Kath is a sole trader having her best year. Her super balance was under $500,000 on 30 June 2026 and she has not contributed for years, so she has five years of unused cap sitting there.
| Unused cap carried forward from 2021-22 | $27,500 |
|---|---|
| From 2022-23 | $27,500 |
| From 2023-24 | $27,500 |
| From 2024-25 | $30,000 |
| From 2025-26 | $30,000 |
| This year’s cap | $32,500 |
| She can contribute and deduct | $175,000 |
She contributes the lot. Then she misses the deduction notice. That notice has to reach her fund by the earlier of the day she lodges her return and 30 June the following year, and the trustee has to acknowledge it in writing.
Without a valid notice there is no deduction. The $175,000 is not a before-tax contribution at all, so it is treated as an after-tax one instead. She has not broken the cap, because the three year bring forward lets her put in up to $390,000. But she has lost a $175,000 deduction, which at her marginal rate is around $82,000 of tax she did not need to pay.
If she had already triggered the bring forward, or her balance had been higher, the same mistake would have broken the after-tax cap on top of losing the deduction.
The contribution was fine. The form was the problem. Kath lost the deduction because the notice never reached her fund, which is easy to do once the money has gone across and the job feels finished.
4. Ignored the letter, and the 94%
Ray has $10,000 of excess contributions. His total super balance was over $2.1 million on 30 June 2026, which makes his after-tax cap nil for the year. The determination arrives, he is busy, and he does nothing.
Because he never elects to release it, the $10,000 stays in the fund and counts as an after-tax contribution. His cap is nil, so all of it is excess, and excess left in the fund is taxed at the top rate.
| Tax his fund already paid on the way in, 15% | $1,500 |
|---|---|
| Tax on the excess in his return, 47% less the 15% credit | $3,200 |
| Then taxed again as an excess after-tax contribution, 47% | $4,700 |
| Total tax on $10,000 | $9,400 |
$9,400 of tax on $10,000. That is the ATO’s “up to 94%”. The last line is the one that did the damage, and it was the avoidable one: had Ray asked his fund to release the money within 60 days, that $4,700 would not have been charged.
OPTION A, DRAFT ONLY: states the trade-offs, then draws the line between tax and financial advice.
Read this version and the one below it, pick one, and delete the other along with both of these grey banners.
Release it, or pay it yourself?
| Release from super | Pay it yourself | |
|---|---|---|
| Effect on your after-tax cap | Release the full 85% and the excess is ignored for that cap. | The whole excess counts against it. |
| Cash out of your pocket now | None. The fund pays, and any surplus is refunded to you. | The full amount, on top of whatever else you owe. |
| Effect on your retirement savings | Money leaves super and stops compounding in a low tax environment. | The money stays in super. |
| Can you change your mind | No. The election cannot be revoked. | Yes, while you are still inside the election window. |
| If you are in a defined benefit fund | Often not available at all. | Usually the only option. |
When releasing avoids a second tax bill
If your after-tax cap is nil or nearly used up, releasing the full 85% is what stops the excess being taxed a second time. Ray’s example is what the second tax looks like.
If you have plenty of after-tax cap left, leaving the excess where it is does not trigger that second tax. Whether it should stay in super is a different question, and the next paragraph says who to ask.
Business Edge Advisors is a registered tax agent, number 20651000, not a licensed financial adviser. We can check the notice, tell you what it costs and show what each option does to your caps. Whether the money should stay in super, given your age and your plans, is a licensed advice question. If you have an adviser we will work through the numbers with them, and if you do not, we can point you to one.
OPTION B, DRAFT ONLY: purely mechanical, no view on which option is better.
The same section written without any recommendation. Delete whichever version you do not want.
Release it, or pay it yourself?
You have two ways to settle the bill. Here is what each one does, so you can take an informed question to whoever advises you on your super.
| Release from super | Pay it yourself | |
|---|---|---|
| Effect on your after-tax cap | Release the full 85% and none of the excess counts towards it. | The whole excess counts towards it. |
| Cash out of your pocket now | None. The fund pays the ATO and any surplus is refunded to you. | The full amount. |
| Your super balance | Reduced by the amount released. | Unchanged. |
| Reversible | No. The election cannot be revoked once made. | Yes, until the election window closes. |
| Defined benefit interests | Often cannot be released. | Usually the only option. |
| Timing | 60 days to elect, 120 days at the outside. Fund pays within 10 business days. | By the due date on your notice of assessment. |
The one mechanical consequence worth isolating: if your after-tax cap is nil or already used, not releasing means the excess is taxed a second time at 47%. Example four sets out that arithmetic in full.
Business Edge Advisors is a registered tax agent, number 20651000, not a licensed financial adviser. We can check the numbers on the notice, what each option does to your caps, and the deadlines. Anything broader about your super belongs with a licensed adviser.
How to avoid this next year
If you earn over $250,000, Division 293 comes with the territory. Going over the cap is avoidable, and almost every case we see comes from one of these.
If you are an employee, read this one.
Payday Super starts on 1 July 2026. Employers now pay super every pay run instead of quarterly, and the changeover creates a one off problem. Your employer can still pay the June 2026 quarter as late as 28 July 2026, and that payment lands in the 2026-27 year. Stack a full year of Payday Super contributions on top and you can have fifteen months of employer super counted against a twelve month cap.
Treasury has said it intends to fix this so people are not pushed over the cap by the transition. At the time of writing nothing has been announced.
Do not count on the fix arriving. And even if it does, it would only cover employer contributions, so it would do nothing for anything you salary sacrifice. If you salary sacrifice and your employer paid the June 2026 quarter in July, check the amount now.
The rest of the list
- Count employer super before you set a sacrifice amount. This is the most common cause by a distance. Work out your employer contributions for the full year first, then sacrifice the difference, then leave a little room.
- More than one job? You can opt out of super guarantee from an employer. If your combined employer super will break the cap, you can apply for a certificate that lets one employer stop paying it. You have to apply before the period starts, so it is a job for the start of the year.
- Send the deduction notice, and keep the acknowledgement. If you claim a deduction for a personal contribution, the notice has to reach the fund by the earlier of the day you lodge and 30 June the following year, and the trustee has to write back. Example three is what happens when this slips.
- A contribution counts when the fund gets it. Not when you send it. A transfer made on 28 June can easily land on 2 July and fall into the wrong year. If you are contributing to hit a cap, allow a fortnight.
- Model catch-up contributions against Division 293 first. A large catch-up contribution counts in full for Division 293, so the year you use five years of cap can be the year you trigger the extra 15%. It is often still worth doing. Just know the number first.
- Self managed fund using contribution reserving? Lodge the form. If a contribution is made in one year and allocated in the next, the ATO cannot see that from the return alone and will issue an excess determination. The request to adjust concessional contributions form is what prevents it, and it can be lodged before or with the fund’s return.
If it has already happened and the circumstances were unusual
You can apply to have contributions disregarded or reallocated to another year, but only where there are special circumstances, meaning something genuinely out of the ordinary that produced an unfair result. It is a high bar, and being unaware of the cap is not it. Two things to know before you spend time on it: the ATO weighs whether it was reasonably foreseeable that you would go over, and the relief does not touch Division 293.
If a notice has landed
Check the numbers before you pay anything. A meaningful share of these are wrong, usually because a fund reported late or twice, or because a self managed fund used contribution reserving and the adjustment form has not been processed yet. Both are fixable, and both are easier to fix before you have elected than after.
Then work out which decision you are making. For Division 293, the only question is where the money comes from. For excess contributions, the question is whether releasing 85% saves you from being taxed twice, and that depends on your after-tax cap, which the letter does not tell you.
If you would like a hand with either, get in touch. Bring the letter and your last member statement and we can usually tell you inside ten minutes whether the assessment is right and which option costs you less.
Sources. Contribution caps, the excess concessional contributions rules, the release election and the Division 293 calculation are from the ATO’s guidance on the concessional contributions cap, the non-concessional contributions cap and Division 293 tax, all current at September 2026. Tax rates are the 2026-27 resident rates plus the 2% Medicare levy. This is general information about how the rules work, not advice about your situation.
