In a recent BT technical podcast, senior technical consultant Matt Manning said that, from an advice perspective, these changes can allow certain clients to take advantage of possible opportunities that will emerge at the start of the new financial year that can align with other changes such as the transfer balance cap.

“The new changes affect potentially any client with an ABP, but the main beneficiaries of this extension will be those with significant wealth inside superannuation,” Mr Manning said.

“This is particularly the case if they are older and therefore subject to a higher minimum drawdown requirement.

“From a client-impact perspective, no one is worse off in the sense that those who still wish to draw the standard minimum or more can still do so, but the option is there for those who either don’t need the funds to meet their cash flow or can use this change to their advantage from a strategy perspective.

“Also, the reduced minimums apply to transition to retirement ABPs, but the 10 per cent maximum is unchanged.”

In terms of taking advantage of strategic opportunities, consider a 76-year-old client that could benefit from this change if they have an ABP and, due to the transfer balance cap limitations, also have funds in the accumulation phase of super.

“In such situations, I would suggest that client take the absolute minimum from their ABP, given their age this would be the 3 per cent reduced minimum rather than the 6 per cent standard minimum,” Mr Manning noted.

“The reason being is if this 3 per cent reduced minimum amount does not meet their cash flow requirements, they can simply withdraw any additional funds they need from the accumulation phase as lump sums.

“By doing so, they are drawing on funds which are subject to the 15 per cent tax on earnings environment and retaining as much funds as possible in the zero per cent tax on investment earnings environment.”

For those who do not have any funds in the accumulation phase, such as a retiree between age 60 and 65 who has $1,000,000 in ABP, and wishes to receive the standard minimum pension amount of $40,000 during FY2021–22, Mr Manning said such a client may still benefit from taking the absolute minimum from their ABP and withdrawing any additional funds they need as a commutation from their ABP.

In the situation, the client could receive $20,000 in pension payments and $20,000 as lump-sum commutations by (prior to the payment being made) electing for the amount to be a lump-sum withdrawal rather than a pension payment.

“This won’t be of any immediate benefit to the client, but it may be of benefit in the future if they outlive their spouse and receive their ABP as a death benefit,” Mr Manning explained.

“The reason being is that pension payments from an ABP are not a transfer balance cap debit event, whereas lump-sum withdrawals are a debit event for transfer balance cap purposes.

“So, say, if their spouse also has $1,000,000 in an ABP. Upon death, due to the transfer balance cap debit, the amount of funds which the surviving spouse can retain in pension phase will be $20,000 more than what would otherwise be the case if they drew the entire $40,000 as pension payments.”