The regulator stated that individuals may receive an additional tax on their super contributions, known as Division 293 tax, if their combined income and contributions are greater than the threshold during a financial year. This threshold is currently $250,000.
The ATO will determine if there is a Division 293 liability once a member has lodged their tax return and the SMSF has lodged its annual return. If a member has a liability the ATO will send a Division 293 notice of assessment.
There are several options for paying the tax, including electing to release some contributions from superannuation.
The ATO continued that payment of this liability is the responsibility of the individual who received it and it must be paid by the due date on the assessment. Individuals have 60 days to elect to release money from super to pay the Division 293 liability, however, this does not change the actual due date for payment.
However, it said an SMSF can’t release any amounts until the member has made an election to release money from their super, and the SMSF has received a release authority from the ATO.
Once the member has made their election, the ATO will send a release authority through the SMSF messaging provider. If the fund does not have a messaging provider, the member will receive a paper form.
Once the member has actioned the release authority, they are required to pay the ATO which will be used to pay the Division 293 liability. Any remaining amount is offset against other debts before being paid to the member.
If the SMSF releases funds before receiving a release authority, a contravention will occur and the member may be liable for penalties. In this event, they should consider submitting a voluntary disclosure form.
