When you start a pension, you need to make minimum pension payments. If you don’t, your SMSF loses its tax exempt status. So getting this right is important.

Minimum Pension Payments

Once you have started a pension, you need to withdraw a minimum amount each year. You calculate this minimum amount by applying a percentage to your pension account balance as of 1 July.


This percentage is usually:

4% if you are under 65

5% if you are under 75

6% if you are under 80

7% if you are under 85

9% if you are under 90

11% if you are under 95

14% if you are 95 or older

But until 30 June 2022 these percentages have been cut in half to help you cope with the COVID-19 crisis. So at the moment you only need to withdraw:

2% if you are under 65

2.5% if you are under 75

3% if you are under 80

3.5% if you are under 85

4.5% if you are under 90

5.5% if you are under 95

7% if you are 95 or older

So these lower percentages to 2020/21 (1 July 2020 to 30 June 2021) as well as 2021/22 (1 July 2021 to 30 June 2022).


Why a minimum pension payment? Why not just leave this up to you? The answer lies in the sole purpose in s62 SIS Act.

Superannuation is to provide for your retirement. It is not meant to be a tax effective vehicle of wealth transfer from one generation to the next. And so the legislator wants your super gone by the time you go. Hence the minimum pension payments.


You take the age as of 1 July. How old were you on 1 July? This will determine the relevant percentage.

Member Account Balance

You apply the percentage to your member account balances in pension phase. Your account based pension balance (ABP). Not your total superannuation balance, which also includes accounts in accumulation phase.

And also not your transfer balance account (TBA). The TBA is about what you move into pension phase. Not about what happens after that. So investment earnings (or losses) and pension payments don’t affect your TBA. But they affect your ABP and hence your minimum pension withdrawals.


If you started your pension before the 1 July, you use the balance as of 1 July. If it commenced during the year, you use the pension balance as of that date – the commencement date. So you need to determine your balance including investment earnings and losses as of that day. So most pensions start on 1 July. Saves you extra work.

Pro Rata

If the pension commences after 1 July, the minimum payment amount is calculated proportionately to the number of days remaining in the financial year, starting from the commencement day. Another reason why starting your pension on 1 July is less work.


The minimum amount is rounded down to the nearest 10 whole dollars.

1 June

You don’t need to worry about minimum pension payments in a year if the pension commences in June of that year.

Below Minimum

What happens if you didn’t pay enough out during the year? You thought you had taken out plenty but as it turns out it wasn’t enough. What now? There is bad news and there is good news.

No Longer ECPI

The bad news is that you lose the pension status for that account. The super income stream for that account is taken to have ceased at the start of that income year for income tax purposes. So that pension account loses its ECPI status. ECPI stands for Exempt Current Pension Income.

Commute Back To Accumulation as of 1 July

So you need to commute that account based pension back to accumulation as of 1 July and hence pay tax on any income or capital gains during that income year. Any payments you made during the year from that account are super lump sum payments. And you need to report the commutation in any TBAR you lodge for that fund.

Commissioner’s Discretion

The good news is that there is a way out of all this. You might be able to apply the Commissioner’s discretion if you made an honest mistake or matters outside of your control prevented you from making the minimum pension payment.

But the honest mistake only counts as such if the shortfall is less than 1/12 of the minimum payment. 1/12 as in one payment of 12 monthly payments per year. And you need to make the catch-up payment as soon as you become aware of the shortfall. If you do that, your pension can keep its ECPI status and no need to commute.


Going back to the list of percentages, can you see how the percentage accelerates? It starts with an increase of 1%, then 2% and then a jump by 3%.

And can you see how the intervals gets shorter? It first is 10 years and then increases to increments of 5 years. So your percentage will increase significantly as you age.  But at the same time your opening balance will decrease as you make payments, unless your investment returns exceed your pension payments. So whether your  pension payments increase or decrease from year to year depends on how this plays out.

Does all this make sense? Just call me if you have a question. My mobile number is 0407 909 779 – Heide. There might be a simple answer to your query.



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An edited version of this article is also published on the Tax Talks website for tax agents.

Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.


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Last Updated on 12 June 2021