ATO ID 2001/618: Superannuation, retirement & employment termination - Reduced Life Expectancy
Date of decision: 12 July 2001
Business line: Superannuation

Issue
Can a taxpayer, suffering from a medical condition, use a reduced life expectancy factor to calculate the deductible amount of an allocated pension under subsection 27H(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision
No. Regulation 9 of the Income Tax Regulations 1936 (ITR 1936) specifies the Australian Life Tables (as published by the Australian Government Actuary) are to be used for the purposes of subsection 27H(2) of the ITAA 1936.

Facts
The taxpayer:

Reasons for decision
Summary: Subsection 27H(2) of the ITAA 1936 provides the formula for calculating the deductible amount to be applied against the gross pension or annuity payments received during a year of income. The formula under subsection 27H(2) is as follows: (A (B - C)) / D Where: Subsection 27H(4) of the ITAA defines 'relevant number', as meaning: ' (a) where the annuity is payable for a term of years certain - the number of years in the term; (b) where the annuity is payable during the lifetime of a person and not thereafter - the life expectation factor of the person; and (c) in any other case - the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be, expected to be payable.' Regulation 9 of the ITR 1936 states that for the purposes of the definition of 'life expectation factor' in subsection 27H(4) of the ITAA 1936, the Australian Life Tables published by the Australian Government Actuary are to be used. There can be no change to life expectation factors for a person suffering from a medical condition. Due to amendments made to the definition of 'annuity' in subsection 27H(4) of the Income Tax Assessment Act 1936 (ITAA 1936) for the 2007-08 and later income years, the above analysis will only apply to a pension paid from a foreign superannuation fund or scheme or an annuity. The views in this ATO ID are relevant to decisions involving superannuation income streams that commenced being paid before 1 July 2007 and to which section 307-125 of the Income Tax (Transitional Provisions) Act 1997 applies.

Legislative references: Income Tax Assessment Act 1936 subsection 27H(2) subsection 27H(4)
Related public rulings and determinations: IT 2157
Subject references: Superannuation, retirement & employment termination Annuities & superannuation pensions Undeducted purchase price Deductible amount Life expectancy