Blog Layout

Minimum Pension Payment Changes from 1 July 2023
Liz Gibbs • June 29, 2023

Retirees who draw an account-based pension from their super need to be aware that the 50% reduction in the minimum pension drawdown rate which applied for previous years will no longer apply from 1 July 2023. The 50% reduction in minimum annual payment amounts for superannuation pensions and annuities was introduced as a temporary measure as a response to the pandemic negatively impacting super and pension/annuity balances. It applied for the 2019-20 to 2022-23 income years.


By way of background, most income streams paid from a super account held in an individual's name (ie the member) are account-based pensions. These pensions are required to meet minimum standards, including not being able to increase the capital supporting the pension using contributions or rollover amounts once the pension has commenced, and paying a minimum amount at least once a year.


In general, minimum payments are determined by 2 factors: 

  • age of the beneficiary - the age of the beneficiary is determined at either the 1 July in the financial year in which the payment is made, or the commencement day of the pension or annuity if that is the year in which it commences.
  • account balance of superannuation or annuity - determined as at 1 July in the financial year in which the payment is made, or by the balance on the pension commencement day (if the pension commenced during the financial year), or the amount of the withdrawal benefit (if the amount of the pension account balance is less than the withdrawal benefit that the member would be entitled to if the pension were to be fully commuted).


For the 2023-24 financial year, the following standard percentage factor will apply:

Age of beneficiary (years)  Standard percentage factor (%)

0-64                                          4

          65-74                                         5

          75-79                                         6

80-84                                        7

          85-89                                         9

          90-94                                        11

          95+                                            14

Example

Trevor is 70 years old and decides to retire on 1 July 2023. On that date, Trevor's super account balance was determined to be $800,000. The minimum drawdown rate according to Trevor's age is 5%, therefore the required annual minimum pension payment for the 2023-24 income year is $40,000 ($800,000 x 5%). If the pension is commenced on another date during the income year, it will need to be apportioned by the number of days remaining in the year. So had Trevor commenced the pension on 1 January 2024 instead, the required annual minimum pension payment for 2023-24 would be $20,000 ($8000 x 5% x 182 days/365 days).


In addition, it should be noted that any pension commenced on or after 1 June in a financial year will not be subject to minimum payment requirements for that specific financial year. Therefore, if Trevor in the above example decided to commence his account-based pension on 1 June 2024 instead of 1 July 2023, no minimum payment is required from the pension.

While the minimum annual payments are mandated, there are no maximum annual payments, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year. This means that retirees can draw a pension above the minimum pension payment amount, especially due to the current cost of living pressures. 


Need help to work out the new minimum pension payment?

With the cost of living going up every day, if you find that your pension is no longer fit for your lifestyle, contact us today, and we can help you work out the best strategy for your situation. Whether it be increasing the minimum pension payment, or a partial commutation of a pension. Contact us today.


IMPORTANT: This communication is factual only and does not constitute financial advice. Please consult a licensed financial planner for advice tailored to your financial circumstances.  Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.

Office open
By Liz Gibbs March 10, 2025
With thanks to all Energex and Emergency services Crew, our electricity has been reconnected and our office is open from today 11 March. We hope you and your loved ones are safe and well following cyclone Alfred. These past few days have been challenging for many, and our thoughts are with everyone affected.
By Liz Gibbs March 10, 2025
Due to a power outage affecting the entire Samford area, the RGA Practice will be operating remotely today, 10 March, until electricity is restored. Please be assured that our team remains available and can be reached at 07 3289 1700. We appreciate your understanding and support during this time. Stay safe, and we look forward to seeing you soon.
Cyclone Alfred
By Liz Gibbs March 5, 2025
As Tropical Cyclone Alfred approaches, we want to remind everyone to take necessary precautions and ensure their safety. We have received some important information that we believe is crucial to share with you to help you prepare for the severe weather conditions ahead.
Work Health and Safety (Sexual Harassment) Amendment Regulation 2024
By Liz Gibbs February 26, 2025
In a significant move to combat workplace sexual harassment, Amendments to the Work Health and Safety Regulation 2011 (as per the Work Health and Safety (Sexual Harassment) Amendment Regulation 2024) will soon commence on 1 March 2025.
By Liz Gibbs February 25, 2025
The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.
What happens to your super when you die?
By Liz Gibbs February 25, 2025
The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?
By Liz Gibbs February 25, 2025
If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems?
Babyboomer wealth
By Liz Gibbs February 25, 2025
“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke.
Penalty for False R&D claims
By Liz Gibbs February 25, 2025
A joint investigation involving the ATO found that, between 2014 and 2017, a Sydney business coach promoted unlawful tax schemes encouraging clients to lodge over-inflated, inaccurate or unsubstantiated research and development ('R&D') tax incentive claims
SMSF lodgement due dates
By Liz Gibbs February 25, 2025
All trustees of SMSFs with assets (including super contributions or any other investments) as at 30 June 2024 need to lodge an SMSF annual return ('SAR') for the 2023/24 financial year.
More Posts
Share by: