Withdrawing minimum pension payments

When self-managed super fund trustees begin a superannuation account-based pension, they are required to withdraw a minimum amount each financial year to obtain a tax exemption for the investment earnings on the fund’s assets.

The minimum pension payment amount is based on a person’s age and the size of their account balance. Trustees must draw a minimum pension payment to remove concessionally taxed money into a fully taxable environment.

Here are three options for those who don’t know what to do with this money:

Invest outside of super: Many people can have up to $500,000-$600,000 in assets without triggering much tax when the higher tax-free threshold of $18,200 or the Seniors And Pensions Tax Offset is taken into account.

Recontribute back into super: Individuals can re-contribute funds back into their super account by using the non-concessional cap of $500,000 if they haven’t already maximised it. From 1 July 2017, under proposed budget changes, trustees aged between 65 and 74 won’t have to meet the work test to contribute to super.

Invest in joint names: For couples, investing in joint names to split income may be a viable solution to splitting the income among a family.