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Account-based minimum drawdowns

Section: 14.4

Once a member starts a pension or annuity on or after 1 July 2007, a minimum amount is required to be paid each year. There is no maximum amount other than the balance of their super account, unless it is a transition to retirement pension which is not in the retirement phase, in which case the maximum amount is 10% of the account balance.

In certain financial years the minimum payment amounts have been halved for certain pensions and annuities for the 2008/10, 2009/10 and 2010/11 years and reduced by 25% for the 2011/12 and 2012/13. The reductions in these years apply only to account-based pensions and annuities (allocated pensions and annuities and market-linked pensions and annuities).

COVID-19 - temporary reducing superannuation minimum payments amounts

Due to significant losses in the financial markets as a result of the COVID-19 crisis which are having a negative effect on the account balance of their superannuation pension or annuity. The Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019/20 and the 2020/21 financial years.

Superannuation and annuity providers calculate the minimum annual payment required at 1 July each year, based on the account balance of the member or annuitant. The 50% reduction will apply to the calculated minimum annual payment.

The minimum payment is calculated using specified percentage factors based on a member's age.

Minimum drawdowns applying in 2020/21:
Age beneficiary Standard percentage factor COVID-19 temporarily measures
Under 65 4% 2%
65-74 5% 2.5%
75-79 6% 3%
80-84 7% 3.5%
85-89 9% 4.5%
90-94 11% 5.5%
95 or older 14% 7%

Source: ATO

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

Last modified: Wednesday, September 30, 2020