The ATO reminds a self-managed super fund (SMSF) must pay a minimum amount each year to a member who is receiving a pension that commenced on or after 20 September 2007. These are mainly account based pensions.
If trustees have not already done so, they must ensure all members receiving an account based pension are paid their minimum pension amount by 30 June.
This is calculated by applying the relevant percentage factor based on the member’s age by the member’s pension account balance calculated as of 1 July 2022 or on a pro-rata basis if the pension commenced part way through the 2023 financial year. If the minimum payment is not made by 30 June, this can result in adverse taxation consequences for the member.
In response to COVID-19, the government temporarily reduced superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for 2020, 2021, 2022 and 2023 financial years. For the 2024 financial year, the 50% reduction in the minimum pension drawdown rate will no longer apply.
This means on 1 July 2023 when trustees calculate the minimum annual payment on a member’s pension balance, the 50% reduction will not apply to the calculated minimum annual payment. Trustees can learn more about how to calculate their member’s minimum pension payment and the new rates that will apply for the 2024 financial year by visiting minimum pension standards.