SMSF Strategy Guide: Online Library

Retirement strategies

SMSF Education
Smsf strategy guide: Online library

The account based pension


When a SMSF member moves from the accumulation phase of life to the retirement phase and has satisfied a condition of release, this generally coincides with the commencement of an income stream being paid from the SMSF. The most common type of income stream paid from a SMSF is known as an account based pension.


An account based pension is simply an income stream paid from the SMSF to the member, generally over a series of periodic payments throughout the year.

Account based pensions will have the following features:

  • Income and capital gains attributable to the pension account will be tax free within the SMSF.
  • If the member is age 60 or over, then the income stream in their hands is also tax free. If they are between their preservation age and age 60, then it is still tax advantaged with a 15% tax rebate on the taxable proportion.
  • The member can access the capital and withdraw lump sums at any time
  • As the income attributable to the assets funding the pension is tax free, any imputation credits received from Australian shares will provide extra income in the form of franking credit refunds (assuming there are no accumulation accounts within the SMSF).


When a member commences an account based pension, there is a minimum amount that must be paid out each year as pension payments. There is no maximum amount, except of course for the entire account balance. These minimum amounts are quoted as a percentage of the member account balance as at the start of the financial year.

The minimum pension factors are as follows:

Age %
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 8%
90-94 11%
95 or over 14%

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