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Account-based minimum drawdowns

Section: 14.4

14.4 Account-based minimum drawdowns

From 1 July 2007, when a member starts a superannuation pension or annuity, a minimum amount is required to be paid out to the member each year. There is no maximum amount other than the balance of the account, unless it is a transition to retirement income stream (TRIS) which is not in retirement phase.  Transition to retirement income streams are subject to a maximum drawdown of 10% of the account balance.

COVID-19 - temporary reducing superannuation minimum payments amounts

Due to significant losses in the financial markets as a result of the COVID-19 crisis, the government announced that superannuation minimum drawdown requirements for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities would be reduced by 50 per cent for the 2019/20, 2020/21 and the 2021/22* income years.

This measure was designed to ease pressure on retirees to sell investment assets in the current economic climate.

Your minimum drawdown allowance will vary depending on your age. Due to significant losses in the financial markets as a result of the COVID-19 crisis which 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.

Source ATO

*On 29 May 2021, the government announced that the reduced annual minimum pension payment amounts, which were originally set to end in 2021, will be extended through to the 2021/22 financial year.

Minimum drawdowns applying in 2019/20, 2020/21 and 2021/22
 
Age of beneficiary Standard percentage factor COVID-19 temporary measures
Under 65 4% 2%
65-74 5% 2.50%
75-79 6% 3%
80-84 7% 3.50%
85-89 9% 4.50%
90-94 11% 5.50%
95 or older 14% 7%

Source: ATO

Note that the minimum payment amounts were also halved for certain pensions and annuities due to market volatility during the global financial crisis 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 applied only to account-based pensions and annuities (allocated pensions and annuities and market-linked pensions and annuities).

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: Monday, June 7, 2021