From 1 July 2023 the superannuation minimum drawdown requirements for account-based pensions have returned to pre-pandemic withdrawal rates. In 2020 the government reduced these rates by 50% as an interim measure in response to the impact the pandemic had on member superannuation balances.
These minimum drawdown requirements apply to Account-Based Pensions and Transition to Retirement Pensions (a 10% maximum also applies).
From 1 July 2023, the minimum percentage required to be withdrawn by age is as follows;
Age | Under 65 | 65-74 | 75-79 | 80-84 | 85-89 | 90-94 | 95 or more |
Withdrawal % | 4% | 5% | 6% | 7% | 9% | 11% | 14% |
This increase in required pension withdrawals may result in potential liquidity challenges.
As minimum pension payments are based on a percentage factor of the member’s pension balance, depending on the income stream generated by assets within the superannuation fund, this may cause liquidity issues for funds. This may be the case for funds which are invested in property and or unlisted shares/units or assets which have irregular income patterns.
As a result, this may put members/trustees in a position where they are required to sell assets if the superannuation fund does not have sufficient cash to support the annual minimum pension withdrawal.
Accordingly, for superannuation funds which have capital tied up in illiquid assets, we recommend obtaining advice to assist with determining the potential tax implications of the possible sale of assets (if required) to assist in meeting the increased minimum drawdown requirement for the 2024 financial year.
Additionally, for Self-Managed Superannuation Funds (“SMSF”) in pension phase, we recommend the 2023 financial statements are prepared as soon as possible, to determine each member’s year-end account balance and thus the 2024 required minimum pension withdrawal.
Should you have any questions concerning how these changes will impact you, or if you require any assistance with the above, please do not hesitate to contact our office. As always, we will be in contact with our SMSF customers in June to confirm the required minimum pension withdrawal for the financial year.
Comments