Can my SMSF pay for my personal ATO Division 293 tax and Excess Concessional Contributions Assessments?

Created on November 13, 2019 11:00 am

Yes – however care needs to be taken to ensure you pay it at the right time by following the below steps.

Division 293 Tax

The Division 293 Tax applies if your combined income and concessional contributions exceed the Division 293 threshold of $250,000 (this was previously $300,000 up to 30 June 2017).

The contributions counted for Division 293 are your superannuation contributions before tax, namely superannuation guarantee and salary sacrifice.

The income threshold includes not only salary and wages but also items such as an Eligible Termination Payment and capital gains so this tax can still apply even if you may not receive a salary that year.

Excess Concessional Contributions Tax

If you have contributed more than your concessional contributions cap of $25,000 then an extra tax will be charged, namely an Excess Concessional Contributions Tax (“ECT”).

The excess concessional contributions will be included as taxable income and taxed at your personal marginal tax rate plus an excess concessional contribution (“ECC”) charge which is effectively an interest penalty on the ECT and is currently at an annual rate of 3.98% for the quarter ending 31 December 2019.

If you have previously lodged your personal tax return for the year and then the ECT will be notified via an amended personal notice of assessment.

How to nominate for my SMSF to pay these taxes?

As both the Division 293 tax and Excess Concessional Contributions Tax assessments are issued to the individual taxpayer, they have the option to either 1) pay the tax personally or 2) nominate their SMSF to pay the tax.

To ensure the SMSF doesn’t inadvertently pay the tax assessments too early and have the ATO deem it as early access to superannuation benefits, the following steps should be taken once the ATO issues these tax assessments:

  1. Elect to release the tax from your SMSF by completing either the election form via the ATO online service through your myGov account or download the form from the ATO website, before the due date
  2. Complete the election form nominating your SMSF to release the monies to the ATO and how much you wish to be released (eg. full or partial amount of the tax owing)
  3. Wait for the ATO to process this election which generally takes about 2 weeks
  4. The ATO will then issue an “Authority to release benefits” form where you confirm the amount to be released from the SMSF and the date this will be actioned
  5. Payment of the Division 293 tax and/or ECT is them made to the ATO directly from the SMSF bank account using the payment methods advised by the ATO

Can my SMSF pay my personal income tax assessment as well?

No – this cannot be paid by your SMSF and must be paid personally at all times.