Changes to the Minimum Pension Requirements for Self Managed Superannuation Funds

As seen in Woopi News November 2023

When a member of a self managed superannuation fund (SMSF) is in pension phase there is a requirement that they draw down a minimum amount throughout each financial year. When the minimum pension requirements are met the proportion of the funds income that supports that pension account is tax free. Where the minimum pension requirements are not met, the superannuation fund loses this tax exemption for that whole financial year.

The minimum pension amount is calculated by way of an aged based percentage multiplied by the member’s pension balance on 30 June of the previous financial year. The percentage increases as the member gets older. For the last three financial years ending June 2020 – June 2023, the government halved the minimum pension requirements. Therefore, those who chose to reduce the amount they were withdrawing from their pension, now need to ensure that their drawdowns are increased throughout this financial year so that their minimum pension requirements are met by 30 June 2024.

There is a concern that some superannuation funds may not have the necessary cash flow in the 2024 financial year to meet their member’s minimum pension requirements, as they have gotten used to the lower withdrawal requirements. This may mean that investments need to be sold to free up the necessary cash to meet the minimum pension requirements. We recommend that anyone with a self managed superannuation Fund in pension phase, attend to their funds annual accounting and audit earlier this year so they can calculate their minimum pension amount and ensure they are withdrawing enough and have sufficient cash flow within the fund to meet their minimum pension requirements by 30 June.

The above is general information only and is not financial advice and should not be relied upon to make any financial decisions. Please ensure that should you need further clarification, that advice is obtained from an appropriately qualified professional and specifically tailored to your circumstances.

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