Division 293 Tax & releasing funds from your SMSF

Getting the Payment Process Right

Division 293 tax is imposed on high income earners (people earning more than $250,000 per annum) who receive any concessional (employer / personal deductible) contributions. 

Division 293 notices from the ATO are addressed to members personally and the default position is that you pay it personally from your own money.  But there are special rules allowing Division 293 payments to be made from your super fund if you wish.

Although the Division 293 notices offer the election to pay this from your SMSF it is important that the tax is not paid as soon as you get notified.  It’s imperative to get the process right.

A mistake a lot of SMSF members make is to simply pay the bill directly from their super fund when the notice is received.  Which if done in this way, the member will need to repay their SMSF the funds withdrawn.

Therefore, please ensure that you:

• Firstly, via your MyGov account, notify the ATO to elect to pay the tax from your SMSF.   As your accountants, it is important that you let us know that you have elected your super fund to pay the bill.  This is because we need to process messages to and from the ATO via our superannuation software through a system known as SuperStream.

• The ATO then issues a release authority at which point we will receive a message that permission to release the funds from your super fund has been granted.

• At that point we then send a digital message back to the ATO.

• Once this is completed, it is then time to pay your Division 293 liability.

The key point to the processes required to pay your Division 293 tax is that the ATO need to issue a release authority before any payment can be made.