- Published on 14 Jun 2026
- - What is Financial Planning?, Self Managed Superannuation, Superannuation
When Australians transition from working life to retirement, one of the most popular vehicles for managing their wealth is an account-based pension. It offers a highly tax-effective stream of income, allowing your superannuation to continue earnings tax-free while providing regular payouts. However, the federal government enforces a strict regulatory catch: you must withdraw a minimum annual amount from the account.
This rule exists to fulfill the "sole purpose test" of superannuation. The government grants generous tax concessions so you can fund your own retirement, not create a tax-sheltered estate to pass on to the next generation. To ensure these funds are systematically spent, the Australian Taxation Office (ATO) applies an age-based percentage scale.
The Age Factor Scale
Your minimum required drawdown is determined by your age on 1 July at the start of each financial year (or on the exact day you commence the pension mid-year). As you get older, the required percentage factor increases steadily. This design reflects average statistical lifespans, accelerating your withdrawals as time goes on.
The standard age brackets and their corresponding minimum percentage factors are structured as follows:
| Age on 1 July | Minimum Annual Drawdown Rate |
|---|---|
| Under 65 | 4% |
| 65 to 74 | 5% |
| 75 to 79 | 6% |
| 80 to 84 | 7% |
| 85 to 89 | 9% |
| 90 to 94 | 11% |
| 95 or more | 14% |
Calculating the Payout in Real Terms
To figure out your exact obligations, multiply the total dollar balance of your pension account on 1 July by your specific age factor.
For instance, consider a 66-year-old retiree who enters the financial year with an account balance of $1,000,000. According to the table, their minimum drawdown rate is 5%. By multiplying $1,000,000 by 0.05, the mandatory minimum withdrawal for that financial year equals $50,000.
If a retiree starts an account-based pension midway through a financial year, the required minimum is adjusted pro-rata based on the number of days remaining until 30 June. If the calculated dollar total ends in a five-dollar increment, it is rounded up to the nearest ten dollars.
What Happens if You Fail to Comply?
Retirees are free to choose how they receive these funds—whether weekly, fortnightly, monthly, or as a single annual lump sum—provided the full minimum dollar amount is cleared into their bank account before midnight on 30 June.
The stakes for missing this deadline are remarkably high. Failing to meet the minimum threshold means the account loses its status as an "eligible income stream". Consequently, the super fund loses its tax-free retirement exemption, and all internal investment earnings generated throughout that financial year become subject to a 15% tax rate.
While there is no maximum limit on how much you can withdraw from a standard account-based pension, managing the lower boundary is a non-negotiable component of a secure retirement strategy.
Why not take the next step and talk to us today
LifeTime Financial Group are specialist (holding appropriate accreditations) financial planners who are ideally positioned to work with you in planning your Superannuation and retirement plans
If you would like to discuss your current position or wider financial planning needs, why not call us today on 03 9596-7733? There is no cost or obligation for our initial conversation/meeting.
LifeTime Financial Group. A leading privately owned Melbourne-based Financial Planning practice with no ties to any financial institution.