SMSF pension guide: account-based pensions, TRIS, TBC, TBAR

How SMSF pensions actually work

A pension inside an SMSF is a series of regular payments from the fund to a member who has met a condition of release. The most common pension is the account-based pension (ABP): the member's accumulation balance is converted into a pension account, the trustees resolve to commence the pension, and from that point earnings on the assets supporting the pension are taxed at 0% inside the fund. That single feature — a 0% earnings rate — is the reason so much SMSF planning revolves around getting money into pension phase as efficiently as possible.

Two conditions gate access. The first is preservation age: for anyone born after 1 July 1964, preservation age is 60. Reaching preservation age plus retiring, or reaching 65 regardless of employment, unlocks a full account-based pension. Before those triggers, you can still commence a transition-to-retirement pension (TRIS) from preservation age while you're still working — a TRIS is non-commutable (you can't take lump sums until you meet a full condition of release) and its earnings only became tax-free once the member met a full condition of release, following the 2017 pension reforms.

Once a pension is running, three ongoing obligations matter. Minimum drawdowns are the first — a percentage of the pension balance at 1 July, or at commencement pro-rated, must be drawn as a pension payment each year: 4% under 65, 5% 65–74, 6% 75–79, 7% 80–84, 9% 85–89, 11% 90–94, 14% at 95+. Missing the minimum by even $1 makes the pension technically stop and the assets fall back into accumulation for the year — a costly mistake we routinely fix on migration. Second, actuary certificates are required for any fund with mixed accumulation and pension balances that isn't fully segregated; easySMSF orders and pays for these as part of standard administration. Third, TBAR events — commencing the pension, commuting it, partial rollbacks — must be reported to the ATO within 28 days of quarter-end.

The transfer balance cap (TBC) is the overlay that limits how much of your super can enjoy the 0% earnings rate. Introduced in 2017 at $1.6 million and indexed since, the general TBC is currently $1.9 million (moving to $2.0 million from 1 July 2025 with indexation). It's a lifetime cap — once you've used it, you don't get another cap even after commuting a pension back to accumulation. Your personal TBC can differ from the general cap depending on when you first commenced a pension. On top of the TBC, the proposed Division 296 tax would apply an extra 15% on earnings attributable to total super balance above $3 million — worth understanding if any member of the fund is near that threshold.

Pensions also drive estate planning. A reversionary pension automatically continues to a nominated beneficiary (usually a spouse) on the pensioner's death, keeping the money in pension phase (subject to the beneficiary's TBC) without needing a fresh pension commencement. Where the beneficiary isn't a spouse, or the pension isn't reversionary, the balance either pays as a death benefit lump sum or as a new death benefit pension — the tax treatment depends on whether the beneficiary is a 'tax dependant' (which is a superannuation concept, not the ATO's ordinary dependant test). easySMSF's death benefits page walks through the practical decisions trustees and members should be making well before the event.

• 0% earnings tax rate on assets supporting an account-based pension
• Preservation age 60 for anyone born after 1 July 1964
• Annual minimum drawdown by age band — miss it and the pension stops
• General transfer balance cap $1.9m (rising to $2.0m from 1 July 2025)
• TBAR events lodged quarterly within 28 days of quarter-end