Important Changes to SMSF Pension Rules from 1 July 2025

Missing Your Minimum Pension Payment Could Cost You More Than You Think

From 1 July 2025, new rules about starting and stopping pensions in your Self-Managed Super Fund (SMSF) will take effect—and they could have serious consequences if you miss taking your minimum pension payment.

What’s Changing?

The ATO has updated how they view a pension that doesn’t meet its minimum payment for the year. If this happens:

• Your pension will be treated as having stopped from 1 July of that year (not the day the mistake was found).

• The balance will move into your accumulation account, where earnings are taxed at up to 15%.

• If you already had money in accumulation phase, it may all get mixed together—undoing careful planning, especially around estate or blended family strategies.

More Problems if You Miss the Minimum:

1. Long Delays in Fixing It

   You might not even know you missed the payment until months later—when your accountant prepares the financials. By then, it's too late, and the pension is backdated as stopped from the previous 1 July.

2. Transfer Balance Cap Issues

   To restart your pension, you need to wait until the end of the financial year after the error was found—possibly up to 22 months later. During that time, any market growth may push your balance over the cap, and some of it could remain in a taxable environment.

3. You Could Miss Out on Tax-Free Earnings

   If markets go up while your money is stuck in accumulation, you lose the benefit of those tax-free earnings in pension phase. Worse, you might not be able to move all of it back to pension phase.

What Should You Do?

Check with your accountant or adviser before 30 June every year to confirm you've taken the minimum pension payment.

Request a "Minimum Pension Report”—don’t rely solely on your annual financials.

Double check any new pensions started during the year—they also need to meet the minimum.

Be extra careful if you have Market Linked or Term Allocated Pensions—they follow different rules.

Act early if there's a problem—delays can make things worse.

In Summary

The ATO’s new rules make it much harder to fix a missed pension payment. That means SMSF trustees need to be extra careful each year to make sure minimum pensions are paid on time. A small mistake can lead to big tax bills and undo years of planning.

If you need further information, please contact your Client Manager.