The experience of an SMSF help desk has shown confusion continues as to what action can be taken when trustees fail to satisfy their obligation to pay a minimum pension amount in a particular financial year.
Specifically, Accurium senior SMSF educator Anthony Cullen noted it was commonplace to be asked whether a partial pension commutation could effectively rectify a shortfall of the required minimum drawdown amount.
“The idea is if I do a partial commutation, do I then have a lower minimum pension amount allowing me to demonstrate I have met the requirement,” Cullen told delegates at SMSF Professionals Day 2026 co-hosted by selfmanagedsuper and Accurium in Sydney yesterday.
“However, the minimum pension is based on the opening balance of the income stream. A partial commutation does not change the opening balance.
“So we do get questions such as: ‘I had a $1 million pension, I only took enough out for a pension of $800,000, I made a $200,000 partial commutation, but the system is still telling me I have to take out more money.’ That’s because the person has not changed the opening balance.”
He revealed inquiries such as these often involve a further flaw that could lead to additional compliance issues.
“The other thing that needs to be taken into consideration is when you decided to make the partial commutation. Was it six months after the financial year when you determined you had not met your minimum requirement?” he asked.
According to Cullen, these circumstances may cause trustees to consider preparing documentation that would effectively backdate any such decision and sternly warned against doing so.
“So making a partial commutation for this purpose is not going to work on many fronts. If you want a lower pension balance to take a lower minimum drawdown amount, you need make the partial commutation on 30 June so in the following financial year you’ll have a lower opening balance,” he said.
SMSF Professionals Day 2026 will be held in Brisbane on 25 May and online on 28 May. Click here to register for the event.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin