- If you’re receiving a pension from your self-managed super fund (SMSF), it’s crucial to meet your minimum payment before 30 June each year.
The ATO has recently clarified what happens if you miss the minimum pension payment requirement—and the consequences can be costly.
What happens if you don’t meet the requirements:
- Your pension ends on 1 July of the applicable financial year, and the balance moves back into the accumulation phase.
- You lose the tax-free earnings benefit on your pension balance— accumulation phase earnings are taxed at 15%.
- Your tax-free and taxable components could be impacted. If your pension balance contains a high proportion of tax-free components, moving it back to accumulation may result in a less favourable tax treatment for beneficiaries if the funds are eventually paid out as a death benefit.
- Your pension doesn’t automatically begin again at the start of the next financial year. A conscious decision must be made to initiate a new retirement. This could be months after year-end, all while the fund is paying 15% tax on earnings.
If you’re in the pension phase, we recommend you:
- Review your pension payments throughout the year, rather than waiting until June to make the payment to avoid any last-minute issues,
- Ensure sufficient cash flow in your SMSF to fund expenses, including pension withdrawals.
- Plan sale of assets in advance to fund pension payments to avoid rushed decisions and market volatility risks.
We’ll be in touch
We’ll be reaching out to all pension members before June to ensure you’re prepared and compliant. If you have any questions in the meantime, please contact the team.
