Guide to SMSF accumulation phase and pension phase

If you've set up a self-managed superannuation fund (SMSF), you're in charge of your own investment decisions, but you're also responsible for complying with super and tax laws. That mean it's imperative to understand the difference between your fund's two stages: the accumulation phase and the pension phase. There's also the option to have a transition phase.

What is an SMSF's accumulation phase?

During your working life, your SMSF is (unsurprisingly) in its accumulation phase. This phase will see you and any employers you have putting money into your SMSF account. You're probably also doing your best to grow the funds in your super account by strategically investing.

When your fund is in this phase you, as a trustee, are responsible for establishing an investment strategy. An investment strategy is a formal document required under super laws.

Any earnings you realise on investments when your SMSF is in accumulation phase are taxed at a rate of 15%.

See also: Buying a property with your SMSF & SMSF borrowing rules: things you need to know

Ideally, the accumulation phase will be longest phase of your fund's life. You can continue making contributions to your SMSF until you turn 75.

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What is an SMSF's pension phase?

When you decide to stop working and access the money in your SMSF, your fund will go into pension phase. This is also known as retirement phase. To access your SMSF's funds, you'll need to have reached what's called 'preservation age'. Preservation age varies depending on when you were born:

Birthdate	Preservation age
Before 1 July 1960	55
1 July 1960 - 30 June 1961	56
1 July 1961 - 30 June 1962	57
1 July 1962 - 30 June 1963	58
1 July 1963 - 30 June 1964	59
On or after 1 July 1964	60

_{Source: ATO} 

Of course, you can keep working and contributing to your SMSF after you reach preservation age. It's up to you as to when you feel the time is right to switch your SMSF from accumulation phase to pension phase - and it doesn't have to happen all at once. There are also ways you may be able to access your super earlier, such as on compassionate grounds or if you are temporarily or permanently incapacitated. 

In the pension phase, the income and wealth realised from your SMSF becomes tax-free. (Note: if there are others in your SMSF and they are still working, their component of the SMSF will stay in the accumulation phase.)

Be aware, there is a limit on the total amount of superannuation that can be transferred into pension, or retirement, phase. The ATO applied a transfer balance cap in July 2017, limiting the total amount of super going into pension phase, no matter if it comes from one or more super funds.

Types of pensions able to be drawn from an SMSF

Simple account-based pension (SABP)

In simple terms, account-based pensions provide a regular income stream of money from your SMSF. These are available when you reach the age of 65, or any time after your preservation age as long as you have retired.

You can choose how much you want to transfer to the pension phase (subject to the transfer balance cap), as well as the size and frequency of your regular payments.

The pension will then last as long as the funds in your SMSF do. But there are some rules. An account-based pension must draw at least a minimum payment amount each financial year to ensure the tax-free status of your fund's earnings.

The minimum amount is based on your age and is expressed as a percentage of your account balance. Here is the latest requirement of the ATO as of January 2026:

Age	Percentage
Under 65	4%
65–74	5%
75–79	6%
80–84	7%
85–89	9%
90–94	11%
95 and over	14%

_{Source: ATO}

Transition to retirement income stream (TRIS)

The SMSF accumulation phase and pension phase don't have to be mutually exclusive. If you're under 65, have reached preservation age, and still want to work part-time, you can access a part-pension through a transition-to-retirement income stream (TRIS), also known as transition-to-retirement (TTR).

The TRIS allows people of preservation age to access a limited amount of their super without having to retire, helping you to work fewer hours while topping up the income you're earning with your super.

Bear in mind, you'll typically pay more tax on a TRIS pension arrangement and face a few extra restrictions compared to an account-based pension. One such restriction is that you can't take your money as a lump sum cash payment while you're still working - your super benefits must be taken as regular payments only.

But there are some tax advantages. If you are 60 or older, your TRIS or TTR payments are tax-free. If you are aged between 55 and 59, your pension is taxed at your marginal tax rate but you'll get a 15% tax offset.

You can start a TRIS or TTR pension by transferring some of your super into an account-based pension and keeping the rest in your accumulation fund. The amount you transfer towards a TRIS won't count towards your transfer balance cap, but there are some rules governing TRIS payments outlined on the ATO website.

A TRIS will automatically move into pension or retirement phase when you turn 65 or if you cease gainful employment after the age of 60. This means the TRIS will benefit from the tax-free status of account-based pensions. The 10% maximum payment restriction will also be lifted at the same time.

Before taking money from your SMSF to put into a TRIS or TTR arrangement, it's recommended you understand how taking those funds out of your SMSF may affect your retirement nest egg later on. It's wise to consult a professional to ensure you get the full picture.

A TRIS or TTR strategy can also be complex, so you'll likely need to pay for financial advice to make sure you have the right structure and are meeting all regulatory requirements.

Ending accumulation phase and transferring to pension phase

There are a few things you need to get lined up when you're considering taking your fund out of accumulation phase:

Check your trust deed

Your SMSF's trust deed must allow the payment of an account-based pension. It's a good idea to review the deed at this stage in case anything needs to be revised or updated. It's also wise to seek the counsel of a legal professional and/or a specialist tax accountant at this point.

Consider your fund's investment strategy

Every SMSF must have a formal investment strategy, and you need to consider whether the strategy you used in your accumulation phase is going to be suitable in your pension phase. If you're hoping the funds you have in your SMSF will last for your lifetime, you may need to consider the best way to achieve this.

Remember, the accumulation phase sees you contributing your fund, while in pension phase you will be drawing down on it. Seeking professional advice can be invaluable in coming up with a plan for long-term, sustainable income.

Meet the minimum payments

The ATO requires you to draw down a minimum amount from your pension fund to keep its tax-free status. If what you're drawing down exceeds your living expenses, you'll need to consider what you do with the excess funds.

Any income generated from these extra funds can result in you being liable for personal tax. An accountant or tax advisor can provide advice if you find yourself in this position.

Keep records

SMSF trustees are required by law to keep records of all transactions associated with their funds, including those relating to pension phase payments. These will also help your accountant to establish your fund's tax position. This means you'll need to be organised, even if you are retiring.

Wills and estate planning

Whether your SMSF is in accumulation or pension phase (or in transition), the rules of your SMSF may allow you to nominate a dependent to receive a lump sum or continue receiving your pension after your death (referred to as a reversionary pension). You can also nominate for your estate to receive a lump sum payment on your death, with that payment to be distributed according to your will.

Consulting an estate planner or lawyer is the best way to ensure the assets and funds in your SMSF are distributed accordingly after your death.

Changing your mind after you start accessing your super

If, after all that, you start accessing your super through an account-based pension and later decide you want to return to work, you can revert to a new arrangement, or perhaps a TRIS, depending on your preference.

You just have to ensure that your SMSF has the appropriate structure to accommodate the change, meeting legal and tax requirements. You'll also have to ensure your investment strategy is the best fit for your new circumstances. Again, it's best to consult a qualified advisor to assist you with this.

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