Super Reforms – Division 293
From 1 July 2017, the threshold at which high income earners will pay additional contributions tax will be lowered from $300,000 to $250,000. This will lower the cutoff point before an extra 15% contributions tax is payable on deductible contributions.
Due to the broad nature of the inclusions (taxable income plus reportable fringe benefits plus total net investment losses plus deductable contributions) strategies to reduce the effect are problematic. Any that were previously employed to reduce the effect of Division 293 may now be applied to the larger demographic. We make no recommendations in this regard accept to acknowledge that there is little that can be done outside of redirecting income – a strategy that has its own limitations.
You need to be aware that any double contribution strategy (contributions reserve strategy) will increase the level of deductable contributions that both count towards the cap and are potentially taxed at the higher rate.