The 50 percent reduction in the minimum pension drawdown rate, which was introduced in response to COVID-19, and will no longer be applicable for the 2023–24 financial year.
The drawdown rate had been temporarily reduced by 50 percent for the 2019–20, 2020–21, 2021–22, and 2022–23 financial years for account-based pensions and similar products.
Starting from 1st July 2023, the 50 percent reduction will not be considered when calculating the minimum annual payment on a pension balance.
To meet the minimum standards for pension payments, SMSFs must adhere to the following requirements:
A minimum amount must be paid at least once a year. Since 1st July 2017, partial commutation payments no longer count towards meeting the minimum annual pension payments
Failure to meet the minimum pension payment means the fund will no longer be exempt from paying taxes on the income generated by the pension assets. As a result, the SMSF will be required to pay taxes on the earnings from the pension assets that would otherwise have been tax-exempt had the minimum pension requirements been met.
This minimum annual payment is calculated by multiplying the member's pension account balance by a percentage factor and rounding it to the nearest 10 whole dollars.
If you are unsure about how the above affects you, please do not hesitate to contact us.