Account-based pension holders in Australia must withdraw a minimum amount each year, calculated as a percentage of the balance at 1 July, stepped up by age: 4% under 65, 5% for 65–74, rising to 14% at 95 and over. These are legal minimums, not recommended withdrawal rates. Many retirees need to draw more than the minimum; others with adequate income from other sources draw exactly the minimum to preserve capital.
If you hold a retirement-phase account-based pension — the most common form of superannuation drawdown in retirement — Australian superannuation law requires you to withdraw a minimum amount each year. The minimum is set as a percentage of your account balance, graduated by age, and recalculated at the start of each financial year. Many retirees default to drawing exactly the minimum without giving it much further thought. That is sometimes the right approach; often it deserves more deliberate attention.
What is the minimum pension drawdown and how is it calculated?
The minimum drawdown is calculated on 1 July each year, based on your age at that date and your account balance at that date. The percentage that applies increases as you age, reflecting the policy intent that superannuation savings in retirement phase should genuinely be drawn down to fund retirement income, rather than left indefinitely as a tax-sheltered wealth accumulation structure. For a member who turns 70 at 1 July with a $500,000 account balance, the applicable percentage is 5%, producing a minimum payment requirement of $25,000 for that financial year.
The age-based percentages set by ITAA 1997 Schedule 7, which currently apply as the standard rates (ATO, ato.gov.au), are:
| Age at 1 July | Minimum drawdown |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95 and over | 14% |
What were the COVID-period drawdown reductions and when did standard rates return?
During the COVID-19 pandemic, the federal government temporarily halved the minimum drawdown percentages. The halved rates applied for FY2019-20 through FY2022-23 — four financial years — in response to market volatility that saw superannuation balances fall sharply. The reduced rates allowed retirees to leave more capital inside their pensions to recover from those falls without being forced to sell assets at depressed prices to fund the required drawdown.
The standard rates resumed from 1 July 2023, for FY2023-24 and all subsequent years. Retirees who adjusted their drawdown settings during the COVID period and have not reviewed them since should confirm that their fund is now applying the standard percentage rather than the halved one. For many funds, this adjustment was automatic, but it is worth verifying — particularly for SMSF members who control their own payment arrangements.
What happens if the minimum pension drawdown isn't met?
The minimum drawdown is a legal requirement, not a guideline. If the minimum is not paid in a financial year, the pension may lose its retirement-phase status for that year, with the fund required to pay tax on earnings as if the balance were in accumulation phase rather than pension phase. For APRA-regulated super funds (the large public-offer funds), the fund typically monitors compliance and may arrange a top-up payment near the end of the financial year if the minimum is at risk of not being met. For SMSF trustees, the responsibility sits with the trustee — there is no automatic safety net, and the consequences of non-compliance are real.
Is there a maximum drawdown for retirement-phase account-based pensions?
Account-based pensions in retirement phase have a minimum but no maximum. You can draw any amount up to and including the entire account balance in a single year. The minimum protects the integrity of the retirement-phase tax concession; the absence of a maximum recognises that the funds are yours to deploy as needed.
This is distinct from a Transition to Retirement Income Stream (TRIS or TTR), which imposes a 10% of balance maximum drawdown while the income stream is not yet in retirement phase — typically before age 65 or before meeting a full condition of release. A TRIS also does not allow lump sum withdrawals (other than in specific limited circumstances). When a TRIS converts to retirement phase — which happens automatically at age 65, or earlier if you meet a qualifying condition and notify your fund — both the 10% cap and the lump sum restriction are lifted. What changed in 2017 was the earnings tax treatment of TRIS (moving from 0% to 15%), not the drawdown cap: the 10% maximum remains in place while the income stream is still in TTR phase.
How is the minimum calculated for pensions commencing mid-year?
For pensions that commence partway through a financial year, the minimum payment is pro-rated based on the number of days remaining in the year from the pension start date. A pension started on 1 January has approximately half the financial year remaining, so roughly half the annual minimum applies. If a pension commences on or after 1 June, the ATO's administrative position is that no minimum payment is required for that financial year at all.
Why is the minimum drawdown a floor and not a spending recommendation?
The minimum drawdown figure is set by law. The right drawdown amount is set by your circumstances, and the two are different things. Some retirees who have adequate income from other sources — the Age Pension, rental income, a defined benefit pension — draw exactly the minimum from their account-based pension to preserve as much capital as possible inside the tax-free retirement-phase environment. Others need to draw more than the minimum to cover actual spending, which is normal and not a problem. Still others in their 80s and 90s find that the required minimum exceeds their spending needs by a growing margin as the age-based percentage increases, producing surplus that flows to estate, gifts, or reinvestment outside super.
The minimum is a useful starting point and a compliance obligation. The right drawdown rate is a planning decision that should account for your spending needs, other income sources, investment performance, estate goals, and the tax implications of drawing more than you need from a tax-free structure. Getting these two things confused — using the legal minimum as if it were the recommended withdrawal — is one of the more common passive errors in retirement income planning.
Key takeaways
- The minimum annual pension drawdown is calculated on your balance at 1 July, multiplied by an age-based percentage: 4% under 65, 5% for 65–74, 6% for 75–79, 7% for 80–84, 9% for 85–89, 11% for 90–94, and 14% at 95 and over.
- Temporary COVID-period halved minimum drawdown rates applied for FY2019-20 through FY2022-23; standard rates resumed from 1 July 2023 and apply for FY2023-24 and all subsequent years — SMSF members who adjusted settings during COVID should confirm their fund has returned to standard rates.
- If a minimum pension payment is not made in a financial year, the pension may lose its retirement-phase tax status for that year, with earnings taxed as if in accumulation phase — SMSF trustees bear responsibility for compliance with no automatic safety net.
- Account-based pensions in retirement phase have no maximum drawdown. A TRIS/TTR income stream has a 10% of balance cap while still in TTR phase; the cap is lifted when the TRIS converts to retirement phase at age 65 or upon meeting a full condition of release.
- For pensions commencing partway through a financial year, the minimum is pro-rated by days remaining; if a pension commences on or after 1 June, the ATO's position is that no minimum payment is required for that financial year.
Frequently asked questions
What is the minimum pension drawdown percentage for my age?
The minimum is set by ITAA 1997 Schedule 7 and is calculated on your account balance at 1 July each year. The rates are: 4% under age 65; 5% for ages 65–74; 6% for 75–79; 7% for 80–84; 9% for 85–89; 11% for 90–94; and 14% at 95 and over. For example, a 72-year-old with a $400,000 balance at 1 July must withdraw at least $20,000 during that financial year.
What happens if I don't pay the minimum pension drawdown?
If the minimum drawdown is not paid in a financial year, the pension may lose its retirement-phase status for that year. The fund would then be required to pay tax on earnings as if the balance were in accumulation phase (taxed at 15%), rather than pension phase (tax-free). For APRA-regulated super funds, the administrator typically monitors compliance and may process a top-up payment near 30 June. SMSF trustees are responsible for compliance themselves, with no automatic safeguard.
When did the COVID-era reduced pension minimums end?
The federal government temporarily halved the minimum drawdown percentages for FY2019-20 through FY2022-23 in response to COVID-19 market volatility. Standard rates resumed from 1 July 2023, applying for FY2023-24 and all subsequent years. Retirees who adjusted drawdown amounts during the COVID period and have not reviewed them since should confirm their current drawdown meets the standard (not halved) percentage — particularly SMSF members who manage their own payment arrangements.
Is there a maximum amount I can draw from my account-based pension?
No. Account-based pensions in retirement phase have a minimum but no maximum — you can withdraw any amount, including the entire account balance, in a single financial year. This is different from a Transition to Retirement Income Stream (TRIS or TTR), which has a maximum of 10% of balance while still in TTR phase and does not allow lump sum withdrawals. The 10% cap is lifted when a TRIS converts to retirement phase.
Should I draw only the minimum from my account-based pension?
Only if the minimum meets your actual spending needs. The minimum is a legal compliance obligation, not a financial recommendation. Retirees who have adequate income from other sources — the Age Pension, rental income, a defined benefit pension — may draw exactly the minimum to preserve capital in the tax-free retirement-phase environment. Others who need more to cover spending should draw what they need. Using the legal minimum as a de facto withdrawal strategy without considering actual needs is one of the more common passive errors in retirement income planning.