The Australian Taxation Office (ATO) has issued a timely and critical alert for Self-Managed Super Fund (SMSF) trustees: all members receiving an account-based pension must be paid their minimum pension amount by 30 June 2025.
This annual requirement applies to pensions that began on or after 20 September 2007, and failing to meet it could cost your fund its valuable tax concessions. Let’s break down what this means and what actions you should take.
What Is the Minimum Pension Drawdown?
The minimum pension payment is the smallest amount that must be withdrawn from a member’s SMSF pension account each financial year. This ensures that the income stream is genuine and continues to receive its tax concessions.
According to the ATO’s Minimum Pension Standards, once a pension has started, the trustee must ensure that the minimum payment is made at least annually. These payments must:
- Be made in cash (or via a transfer to the member’s bank account).
- Meet the minimum percentage based on the member’s age at 1 July 2024.
- Be calculated using the pension account balance as of that date.
If a pension starts mid-year, the minimum amount is calculated on a pro-rata basis, factoring in the number of days the pension was in place.
Minimum Pension Rates for 2024–25
| Age at 1 July 2024 | Minimum Drawdown Rate |
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95+ | 14% |
These are the standard rates reinstated after the end of temporary COVID-19 drawdown relief.
What Happens If You Don’t Meet the Minimum?
If a member does not receive at least the minimum required pension payment by 30 June, the income stream is taken to have ceased at the start of that financial year. This means:
- The SMSF will lose eligibility to claim exempt current pension income (ECPI) for that income stream.
- Any income earned on the pension account will be taxed at 15%.
- A new pension must be commenced for the next year, and any commutation or transfer balance account adjustments may apply.
There are very limited exceptions. Trustees must apply to the ATO for discretion, and only minor shortfalls caused by honest mistakes may be considered.
Trustee To-Do List: Stay on Track
To ensure compliance with the ATO’s rules, trustees should:
- Check each member’s pension account balance as of 1 July 2024.
- Apply the correct minimum drawdown rate based on their age.
- Calculate pro-rata amounts if the pension commenced during the year.
- Ensure all payments are made in cash by 30 June 2025.
- Document all transactions clearly and keep detailed records.
- Seek professional advice if you’re unsure of your obligations.
Pro Tip: Automate for Accuracy
Avoid missed payments and last-minute issues by setting up automated payments or calendar reminders well in advance of the 30 June deadline.
Why You Should Act Now
Trustees often overlook these obligations until it’s too late. Getting ahead of your EOFY compliance tasks helps:
- Maintain your fund’s tax-free income status.
- Avoid penalties and extra administrative burdens.
- Give peace of mind to members and advisors.
Final Thoughts
Meeting the minimum pension standards is not just good practice—it’s essential for keeping your SMSF in compliance and safeguarding its tax advantages.
Stay proactive, stay compliant.
For further reading, visit the ATO’s full guidance on Income stream pension rules and payments.