Written by Fabian Bussoletti, Technical Manager, SMSF Association
When determining an individual’s liability to Division 293 tax, the ATO uses information obtained from the individual’s personal income tax return, as well as information reported to the ATO by their super fund.
As the 31 October due date for lodging personal income tax returns has now passed, we can expect that the ATO will shortly start issuing Division 293 tax assessments to affected individuals.
While Division 293 tax only applies to individuals who had total income above $250,000 for the 2022-23 financial year, those affected will broadly be required to pay an additional 15% tax on their 2022-23 concessional contributions (or at least those that are within the individual’s concessional contribution cap).
Importantly, an individual is personally liable for the payment of any Division 293 tax liability that arises. And, any resulting liability must generally be paid within 21 days of the assessment being issued in order to avoid penalties.
However, individuals may elect to release an amount from their fund, within 60 days of the issue date, to pay the tax debt instead.
Should this election be made, the ATO will subsequently issue a release authority to the individual’s nominated superannuation fund(s) – and the super fund(s) will need to pay the requested amount directly to the ATO within 10 business days.
Therefore, to avoid additional penalties being imposed, affected individuals should consider personally paying their tax liability by the due date – even if they intend to elect for monies to be released from their superannuation fund.
Where the tax liability is extinguished before the fund releases monies to the ATO, the ATO will generally refund any released amounts to the individual – unless the individual has any other tax or Australian Government debts owing.
Fund trustees who receive a release authority should follow the usual timeframes and processes for responding to ATO issued release authorities in the SuperStream rollover standard.
It is also a timely reminder to ensure that a fund’s Electronic Service Address (ESA) complies with the rollovers and release authorities standards. See the ATO website for more information on SuperStream Release Authorities and SuperStream messaging providers.
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