Every account-based pension has a legal minimum you must withdraw each financial year, starting at a low percentage for those under age 65 and increasing up to a higher percentage for those aged 95 and over. The percentage applies to your account balance on 1 July (or your pension start date in year one), and if you fall short of it, the tax office can treat your income stream as having stopped, changing how later payments are taxed.
TL;DR:
- Minimum drawdown rates increase with age, reaching 14% for those 95 and older, and temporarily halved during 2019–2023 to ease market pressure.
- Accurate calculation requires careful timing, pro-rata adjustments for mid-year starts, and rounding rules, to avoid penalties or tax implications.
- Failure to meet minimum payments risks the income being classified as a lump sum, which can lead to higher taxation and loss of tax-free status.
- Drawing above the minimum can accelerate asset depletion, especially under sequence-of-returns risk, reducing long-term income security.
- Modelling withdrawal scenarios based on personal balances and market conditions surpasses the minimum table’s guidance in planning sustainable retirement income.
Table of Contents
- Minimum drawdown rates by age: the current percentage table
- How to calculate your minimum pension payment
- Payment timing and deadlines you need to track
- When the standard rules don't apply
- Tax risk, market timing, and choosing your own drawdown level
- How scenario modelling turns the minimum into a real plan
- Drawdowns and your Age Pension: what Centrelink actually counts
- Commuting your pension: partial and full withdrawal rules
- How your pension interacts with other super components
- Managing your drawdowns without eroding your capital
- Authoritative pages and calculators to check
- The real problem isn't the rules, it's what people do after reading them
- Sources
Minimum drawdown rates by age: the current percentage table
The rate you must draw scales up with age, on the logic that older retirees have shorter timeframes to spread their capital over. These are the standard factors currently in force, and they apply to every account-based pension unless a specific exception says otherwise.
| Age at 1 July | Minimum drawdown rate |
|---|---|
| Under 65 | around 4% |
| 65–69 | around 5% |
| 70–74 | 5% to 7% |
| 75–79 | 5% to 7% |
| 80–84 | 8% |
| 85–89 | 11% |
| 95 or older | 14% |
The Australian Taxation Office's rules on pension payments confirm these are the factors used to calculate the annual minimum for every retirement-phase account-based pension. Once the dollar figure is calculated, it gets rounded to the nearest $10, and an exact $5 rounds up rather than down.
You may have heard that these rates were once cut in half. That's true. From 2019–20 through to 2022–23, the government temporarily halved the minimum drawdown rates to ease pressure on retirees during volatile markets, as SuperGuide's rundown of the relief period documents. Standard rates have applied again since 1 July 2023, and there's no indication they'll be reduced again in the near term.
How to calculate your minimum pension payment
The calculation itself is simple arithmetic, but the timing rules trip people up more often than the maths does.
- Identify your account balance on the relevant date. For an ongoing pension, that's 1 July. For a pension you started partway through the year, it's your pension start date.
- Find your age-based percentage factor from the table above.
- Multiply the balance by the factor to get your annual minimum.
- If your pension started mid-year, pro-rata the figure by multiplying the annual minimum by the number of days remaining in the financial year, divided by 365 (or 366 in a leap year).
- Round the result to the nearest $10, rounding an exact $5 upward.
Pro Tip: Run your numbers through a worked example before assuming a simple balance-times-percentage calculation is correct in your first year. Pro-rata timing and rounding can shift the figure by hundreds of dollars, and getting it wrong in year one sets a poor benchmark for every year after.
Here's a worked example. Say you're 68, and you start an account-based pension on 1 March with a balance of $500,000. There are 122 days left in the financial year. Pro-rated for 122 remaining days, that's $25,000 × 122 ÷ 365, which comes to $8,356, rounding to $8,360. The ATO's own guidance on pension rules sets out this exact method. Extra withdrawals beyond the minimum reduce next year's balance and therefore next year's dollar figure, but they never change your percentage factor.
Payment timing and deadlines you need to track
The minimum must be paid at some point within each financial year, from 1 July to 30 June, not as a single fixed date. How that plays out depends heavily on who runs your fund.
- Large superannuation funds generally calculate and pay your minimum automatically, often in fortnightly, monthly, or quarterly instalments that add up to the annual figure.
- Self-managed super fund trustees carry the responsibility themselves. There's no automatic system doing it for you, so the ATO's reminder on minimum pension drawdown deadlines is worth bookmarking each year.
- If your pension starts on or after 1 June, you generally don't need to make any payment in that first, very short financial year.
- Missing the 30 June deadline as an SMSF trustee is the single most common compliance slip in this area, and it's entirely avoidable with a calendar reminder.
When the standard rules don't apply
Not every income stream follows the standard percentage table, and it's worth checking which category yours falls into.
- Transition-to-retirement (TTR) pensions, held by people who haven't yet met a full retirement condition of release, face a maximum withdrawal of 10% of the balance each year, on top of the usual minimum. TTR income streams sit outside full retirement phase until you meet a condition of release, at which point different rules on pension phase apply.
- Legacy defined-benefit pensions and some pre-2017 products can run on entirely different payment formulas set by their original terms, rather than the age-based table.
- The pandemic-era halving of minimum rates, covering 2019–20 to 2022–23, is now history. Standard rates have applied since 2023–24, and no further relief has been announced.
Tax risk, market timing, and choosing your own drawdown level
Miss your minimum, and the consequences go beyond an awkward phone call with your fund. If the payment isn't made, your income stream can be treated as having ceased from the start of that financial year, and subsequent payments may be taxed as lump sums rather than pension income, according to the ATO's guidance on retirement withdrawals. That can mean losing the tax-free treatment that earnings in retirement phase normally enjoy, which is a costly outcome for what's usually an administrative oversight.
There's a second risk that has nothing to do with compliance: sequence-of-returns risk. Your mandatory percentage climbs every five years as you age, right through your 70s, 80s and beyond, precisely the decades when a market downturn does the most lasting damage to your balance. Drawing a rising percentage from a shrinking pool after a bad few years can permanently impair your capital in a way that the same withdrawal made during a strong market never would. Research into sequence-of-returns risk explains why the order of returns, not just their average, decides how long your money lasts.
The statutory minimum is a compliance floor, not a personalised income plan. Before drawing more than that floor, it pays to model your specific balance, age, and expected returns against different scenarios, rather than guessing. Guides on tax in retirement and on setting a safe withdrawal rate are a reasonable starting point for that thinking.
How scenario modelling turns the minimum into a real plan
The legal minimum tells you what you must withdraw. It tells you nothing about what you should withdraw to make your balance last as long as you do. That's where tax-aware scenario modelling earns its keep, testing how different withdrawal levels play out against market variability, your specific mix of taxed and tax-free super components, and your likely lifespan.
Consider two simplified paths over 20 years from age 65: drawing only the statutory minimum each year, versus drawing a modest 1–2 percentage points above it to fund a more comfortable lifestyle early in retirement. The gap between those two paths compounds, and which one is sustainable depends entirely on your starting balance, asset mix, and how markets behave along the way. A modelling approach treats both the taxed and tax-exempt components of your income stream as variables, because the sustainability threshold for a higher drawdown shifts once tax composition is factored in properly.
This is illustrative reasoning, not personal advice, and every retiree's numbers will differ.
Drawdowns and your Age Pension: what Centrelink actually counts
Every dollar you draw from your account-based pension changes your balance, and your balance is one half of what Centrelink measures under the assets test. The other half, the income test, looks at a deemed rate of return on that balance rather than your actual withdrawals, so drawing more than the minimum doesn't directly increase your assessable income under deeming rules. It does, however, shrink your account balance faster, which lowers what you're assessed on under the assets test over time.
This creates a genuine trade-off. Drawing down your account-based pension faster can bring you under the assets test threshold sooner, potentially increasing your Age Pension entitlement, but it also means less capital left working for you later in retirement. Retirees sometimes draw the wrong lesson from this and assume spending down assets always helps their Centrelink position. It can, but only up to the point where the reduced capital also reduces your long-term income security.
Centrelink reassesses your account balance periodically, generally aligned with reporting from your fund, so a large one-off withdrawal can shift your assessed assets faster than a series of smaller payments would. Anyone close to the assets test threshold should model both the pension and Age Pension sides together rather than treating them as separate decisions, since a change on one side almost always moves the other.
Commuting your pension: partial and full withdrawal rules
Commutation means converting some or all of your pension balance back into a lump sum, either paid out to you or rolled back into the accumulation phase of super. It's a different mechanism from your regular pension payments, and the two interact in ways that catch people out.
A partial commutation, where you take a portion of your balance as a lump sum rather than as pension income, generally does not count toward satisfying your annual minimum payment requirement. The ATO's rules on income stream payments treat these as lump sums for tax purposes, which matters if you're relying on a commutation to tick the minimum-payment box for the year. It won't. You still need to separately withdraw the calculated minimum as pension income.
Full commutation closes the pension entirely, converting the remaining balance back to a lump sum or rolling it to a new income stream. People commute in full to consolidate accounts, to start a new pension after a large contribution, or to manage transfer balance cap issues. Partial commutations are more common as a one-off way to fund a large purchase, such as paying off a mortgage or helping a family member, without permanently changing the size of your ongoing pension payments. Check your fund's specific process before commuting. Some funds set minimum commutation amounts or processing timeframes that affect how quickly you can access the funds.
How your pension interacts with other super components
An account-based pension doesn't exist in isolation. It sits inside a broader structure of components and product types that affect what you can and can't do with it.
Your pension balance is typically made up of a taxable component and a tax-free component, built from different contribution types over your working life. Withdrawals draw proportionally from both, and you generally can't choose to withdraw only the tax-free portion first. This proportional rule matters most for anyone under 60 taking lump sums, since the taxable component attracts tax while the tax-free component doesn't.
Reversionary pensions add another layer. A reversionary nomination means your pension automatically continues to a nominated beneficiary, usually a spouse, on your death, rather than being paid out as a death benefit lump sum that needs a fresh decision. The beneficiary receives the same income stream, at the same payment schedule, without a gap in payments while paperwork is sorted. This can be valuable for continuity, but it also means the beneficiary inherits your transfer balance cap position, which can create complications if they already have their own pension running. Anyone considering a reversionary nomination should check how it interacts with their spouse's transfer balance cap before locking it in, since the cap is a fixed limit regardless of how the money arrives.
Managing your drawdowns without eroding your capital
Treating the minimum as a floor rather than a target is the first real strategy most retirees discover, usually after a few years of watching their balance shrink faster than expected.
A practical starting point is separating your essential spending from your discretionary spending, and matching the essential portion to a withdrawal rate you know your balance can sustain for decades, not just for the next few years. Drawing well above the minimum in strong market years and closer to the minimum in weak ones, sometimes called a dynamic or variable withdrawal approach, helps protect capital from the sequencing risk covered earlier. Guidance on planning retirement income walks through this kind of staged approach in more detail.
Keeping a cash buffer of a year or two of essential spending outside your growth assets also reduces the pressure to sell down investments during a downturn just to meet your mandatory minimum. As your percentage factor climbs with age, revisiting your asset allocation every few years, rather than leaving it static from age 65 to 95, keeps your income sustainable without forcing you to draw down growth assets at exactly the wrong time.
Authoritative pages and calculators to check
For the official percentage factors, balance dates, and rounding rules, go straight to the ATO's income stream pension rules. Moneysmart's account-based pensions page explains the mechanics in plain language, and SuperGuide's minimum drawdown rates page includes a calculator for testing your own figures.
The real problem isn't the rules, it's what people do after reading them
The minimum drawdown table gets treated as gospel far too often. It hasn't. It's told them the floor, not the plan.
Where conventional advice falls short is in stopping at compliance. That's the actual decision that matters, and it depends on your balance, your other assets, your health, and how markets behave in the specific years you happen to retire into.
My take: run the compliance numbers first, because they're non-negotiable and take five minutes. Then spend real time modelling two or three withdrawal scenarios against different market conditions before you settle on a number above the minimum. The rate you choose in your first year of retirement tends to anchor your spending for years afterward, so it deserves more scrutiny than the legal minimum ever gets.
— Jonathan
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
Sources
- Income stream (pension) rules and payments | Australian Taxation Office
- Account-based pensions | Moneysmart
- Minimum pension drawdown rates (2026–27) and calculator | SuperGuide