SMSF phases krakenimages-unsplash.jpg

If you've set up a self-managed superannuation fund (SMSF), congratulations! You are in charge of your own investment decisions, but you're also responsible for complying with super and tax laws.

Creating your own SMSF puts you in control, so 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.

Let's go over all the details.

SMSF accumulation phase

During your working life, while you're accumulating money in your superannuation account, your SMSF is (unsurprisingly) in its accumulation phase.

During this phase, you and any employers you have will be putting money into your SMSF accumulation account. You are 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.

Leveraging to grow wealth? Check out these competitive SMSF loans

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.99% p.a.
7.00% p.a.
Principal & Interest
  • Available for Purchase and Refinance. No application fee and no settlement fee
  • No monthly, annual or ongoing fees
  • Access your SMSF loan via our easy-to-use online app Smart Money
7.24% p.a.
7.25% p.a.
Principal & Interest
7.79% p.a.
8.58% p.a.
Principal & Interest
7.49% p.a.
7.50% p.a.
Principal & Interest
  • Available for Purchase and Refinance
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

SMSF pension phase

When you decide to stop working and access the money in your SMSF to fund your retirement, your fund will go into pension phase. This is also known as retirement phase.

In this 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.)

You can only access your SMSF funds when you reach what's called 'preservation age'. Preservation age varies depending on when you were born.

The current preservation age schedule, as set by the Australian government, is outlined below:


Preservation age

Before 1 July 1960


Between 1 July 1960 and 30 June 1961


Between 1 July 1961 and 30 June 1962


Between 1 July 1962 and 30 June 1963


Between 1 July 1963 and 30 June 1964


On or after 1 July 1964


Source: ATO (As at May 2024)

There are other ways you may be able to access your super earlier, such as on compassionate grounds or if you are temporarily or permanently incapacitated. The Australian Tax Office (ATO) applies strict eligibility criteria and outlines the grounds under which you may be able to apply for earlier release.

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.

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.

As of May 2024, the general transfer balance cap for the 2024-25 financial year is $1.9 million.

You can see the latest schedule of transfer balance caps via the ATO website.

Types of pensions from an SMSF

Simple account-based pension (SABP)

This is available when you reach the age of 65, or any time after your preservation age as long as you have retired.

In simple terms, account-based pensions provide a regular income stream of money from your SMSF.

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 last as long as the funds in your SMSF do.

Remember, any investment earnings your account realises in pension phase are generally tax-free. 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 May 2024:



Under 65












95 and over


Source: ATO

Those percentages are based on your account's balance when you switch to pension phase and then its balance on 1 July each year after that. There are no restrictions on the maximum you can withdraw or the timing of the payments. You can withdraw additional lump sum amounts from account-based pensions as and when you need them.

Transition to retirement income stream (TRIS)

It's important to note the SMSF accumulation phase and pension phase don't have to be mutually exclusive.

If you are under 65 but have reached preservation age and still want to work part-time, you can access part of your super. This can be through a transition-to-retirement income stream (TRIS), also known as transition-to-retirement (TTR).

Basically, it allows people of preservation age to access a limited amount of their super (currently up to 10%) without having to retire. It can effectively help you 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. Let's run through them.

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 in general 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

As we've touched on, every SMSF must have a formal investment strategy. 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

As noted above, the ATO requires you to draw down a minimum amount from your pension fund to keep its tax-free status.

If what you are 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.

Image by krakenimages on Unsplash