Pensions: end of financial year actions

Now that the end of the 2022/23 financial year is almost here, superannuation members who are currently receiving pensions need to take certain actions.

First:

• Ensure that the minimum amount has been paid on or before 30 June 2023 (pro-rated if the pension commenced part way through the current financial year).
• Payment means a credit to the personal bank account of the member receiving the pension which has a date of transaction being 30 June 2023 or earlier.
• While there is an administrative concession provided by the ATO for inadvertent underpayment of the required pension amount, it is far better to avoid having to rely on this concession.

1. The underpayment must be inadvertent.
2. The underpayment cannot exceed 1/12^th of the normal pension payment (if the pension was being paid monthly, then inadvertently paying the June payment in July will be disregarded).
3. Finally, the concession is not an informal grant of a right to be tardy in pension payments.  Generally, the concession can only be used once.  If the concession is used a second time the ATO will have to approve the use of the concession.

The consequence of the failure to satisfy the minimum payment rule is that the superannuation account supporting the pension will be treated as not being in retirement phase, thereby incurring more tax for the superannuation fund (and thereby reduced earnings for the affected member).   This adverse taxation consequence only applies to pensions in retirement phase: it does not apply to transition to retirement pensions in the period before the member retires or attains age 65 (or otherwise satisfies an unrestricted release condition).

Second:

• Unlike the current financial year, the minimum pension amounts for 2023/24 will be determined using the normal drawdown rates:  4% if under age 65 at 1 July 2023, 5% if aged 65 but less than 74 at 1 July 2023 and so on …  The full table is set out below: