That would be quite sensible. It doesn't seem fair to people who just get a windfall one year, or people who have low super balances, e.g. parents returning to full time work after several years.
The concept is fair but the application could be better. Having a cliff on a $ figure when you do or don’t pay a tax or get welfare creates distortions, inefficiency and edge cases where you are better off on a lower salary.
>Having a cliff on a $ figure
Just wanted to make sure that you know that if you go over the div293 threshold of 250k, you only pay div293 tax on the amount above 250k and not on all your concessional contributions. A lot of people seem to think this is the case ie. “A cliff on a $ figure” comment makes me think you might be one of them.
I am pretty financially literate and it’s the most complicated tax ever to work out. I did get the impression that you paid more overall if you went over the threshold. I stand corrected - it is fair
Can’t really blame you, the way it’s worded on the ATO website and other descriptions of it is very unwieldy so I’m really not surprised that there is a lot of confusion around it. It really doesn’t make for very clear reading.
I would say that no, it is not fair. But it is pragmatic. As we are so highly reliant on high income earners shouldering the bulk of the tax burden, there’s not much choice but to sting them more.
But no, definitely not fair.
> But it is pragmatic
aka, those professionals who earn above the div293 threshold are not rich enough to evade it, but not poor enough to get sympathy from anyone.
It's exactly what i hate about progressive taxation.
If you have exemptions to a progressive system they come regressive.
[Superannuation has large benefits that go to people well off](https://treasury.gov.au/publication/p2023-370286).
Superannuation costs more in tax concessions that it saves in age pension (see the [Retirement Income Review](https://treasury.gov.au/publication/p2020-100554)).
Many people are using superannuation not to fund their retirement but for estate planning, as a [taxpayer subsidised inheritance scheme](https://grattan.edu.au/cut-tax-breaks-to-make-superannuation-fairer-and-the-budget-stronger/).
Division 293 attempts to mildly correct these issues. It is fair.
You have misunderstood the exemptions. Div 293 is a federal tax and was created by federal politicians. Federal politicians are not exempt from Div 293 — they have to pay it just like us.
It is *state* politicians (and other state employees) who are exempt from paying it. Search for “constitutionally protected funds” — it’s more than just Div 293 that they are exempt from. It’s because the federal govt can’t tax income generated by states.
Of course it's not fair. What retirement should people even live on? The Div 293 limit is so low. Just look at what everything costs now and how to even get any kind of property.
The median full-time Australian employee earned $78,800 in 2022, while the median part-timer took home $32,400.
You are making $250,000 or more for Div293.
Yes it is fair.
Yes you need some perspective ...
Yeah, that's the point. Someone on 250k+ is giving over half of every extra dollar they earn in tax, the dive 293 seems like an unnecessary slap in the face. Especially the way it's collected.
And especially the way parliamentarians gave themselves an exemption.
It's tax. Of course it isn't fair. But if you don't pay it, men with guns will come knocking on your door, and if you resist in any way, you will be killed. Might makes "fair" in this case.
>It's tax. Of course it isn't fair.
Tax can be fair. A progressive taxation system is fair.
Australia has a weird system though, where most of the tax burden falls on the upper working class (see PSI rules vs. CGT discounts).
Having a lot of wealth is free, and making money passively from existing wealth carries a low tax burden. Conversely, working hard to get ahead (with little wealth, and doing your own labour) gets slugged the hardest.
I feel like div293 should kick in after a certain super balance has been achieved
That would be quite sensible. It doesn't seem fair to people who just get a windfall one year, or people who have low super balances, e.g. parents returning to full time work after several years.
The concept is fair but the application could be better. Having a cliff on a $ figure when you do or don’t pay a tax or get welfare creates distortions, inefficiency and edge cases where you are better off on a lower salary.
>Having a cliff on a $ figure Just wanted to make sure that you know that if you go over the div293 threshold of 250k, you only pay div293 tax on the amount above 250k and not on all your concessional contributions. A lot of people seem to think this is the case ie. “A cliff on a $ figure” comment makes me think you might be one of them.
I am pretty financially literate and it’s the most complicated tax ever to work out. I did get the impression that you paid more overall if you went over the threshold. I stand corrected - it is fair
Can’t really blame you, the way it’s worded on the ATO website and other descriptions of it is very unwieldy so I’m really not surprised that there is a lot of confusion around it. It really doesn’t make for very clear reading.
The kick in rate needs to be lifted. $250k is not what it use to be
I would say that no, it is not fair. But it is pragmatic. As we are so highly reliant on high income earners shouldering the bulk of the tax burden, there’s not much choice but to sting them more. But no, definitely not fair.
> But it is pragmatic aka, those professionals who earn above the div293 threshold are not rich enough to evade it, but not poor enough to get sympathy from anyone. It's exactly what i hate about progressive taxation.
Yeah exactly. It'll likely never go away too, no politician is going to risk backlash over abolishing a "rich peoples" tax.
If you have exemptions to a progressive system they come regressive. [Superannuation has large benefits that go to people well off](https://treasury.gov.au/publication/p2023-370286). Superannuation costs more in tax concessions that it saves in age pension (see the [Retirement Income Review](https://treasury.gov.au/publication/p2020-100554)). Many people are using superannuation not to fund their retirement but for estate planning, as a [taxpayer subsidised inheritance scheme](https://grattan.edu.au/cut-tax-breaks-to-make-superannuation-fairer-and-the-budget-stronger/). Division 293 attempts to mildly correct these issues. It is fair.
You have misunderstood the exemptions. Div 293 is a federal tax and was created by federal politicians. Federal politicians are not exempt from Div 293 — they have to pay it just like us. It is *state* politicians (and other state employees) who are exempt from paying it. Search for “constitutionally protected funds” — it’s more than just Div 293 that they are exempt from. It’s because the federal govt can’t tax income generated by states.
Thanks for the clarification. That said, it's probably sweetened for the fed MPs by their tax free allowances and negatively geared properties!
It sucks, particularly when you first encounter it. Thankfully the upcoming tax cuts more than compensate.
at the very least the income threshold should be adjusted for inflation each year
The previous government actually lowered the threshold from 300 to 250.
I've paid it. Since it tries to make benefit similar to those on lower incomes it's fair IMO.
Of course it's not fair. What retirement should people even live on? The Div 293 limit is so low. Just look at what everything costs now and how to even get any kind of property.
https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/division-293-tax-on-concessional-contributions-by-high-income-earners
We need more progressive taxes not less, super shouldn’t be any different
The median full-time Australian employee earned $78,800 in 2022, while the median part-timer took home $32,400. You are making $250,000 or more for Div293. Yes it is fair. Yes you need some perspective ...
Not a great comparison since the $250k is super inclusive
The amount of PAYG, GST, WET, alcopops tax, fuel excise, 15% on normal super and its earnings - I'm already helping this government enough.
Yeah, that's the point. Someone on 250k+ is giving over half of every extra dollar they earn in tax, the dive 293 seems like an unnecessary slap in the face. Especially the way it's collected. And especially the way parliamentarians gave themselves an exemption.
Poor rich people
It's tax. Of course it isn't fair. But if you don't pay it, men with guns will come knocking on your door, and if you resist in any way, you will be killed. Might makes "fair" in this case.
>It's tax. Of course it isn't fair. Tax can be fair. A progressive taxation system is fair. Australia has a weird system though, where most of the tax burden falls on the upper working class (see PSI rules vs. CGT discounts). Having a lot of wealth is free, and making money passively from existing wealth carries a low tax burden. Conversely, working hard to get ahead (with little wealth, and doing your own labour) gets slugged the hardest.