Private ruling: Undeducted purchase price
Date of advice: 17 April 2026
Published: 6 July 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension in accordance with section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. Your pension is paid by the Fund, a scheme maintained in a foreign country. Your pension commenced on XX and is payable for life. You currently receive XX% of the pension. The residual capital value of the pension is XX When the pension commenced you were XX years of age and your life expectancy factor was XX. Your pension is paid on a monthly basis.

Relevant legislative provisions: Income Tax Assessment Act 1936 former subsection 27A(1) | Income Tax Assessment Act 1936 section 27H | Income Tax Assessment Act 1936 subsection 27H(2) | Income Tax Assessment Act 1936 subsection 27H(3) | Income Tax Assessment Act 1936 subsection 27H(4) | Income Tax Assessment Act 1997 section 960-50 | Income Tax Assessment (1936 Act) Regulation 2015 section 9 | Income Tax Assessment (1997 Act) Regulations 2021 section 960-50.01 | Superannuation Industry (Supervision) Regulations 1994 Schedule 1B

Reasons for decision: Summary: The definition of purchase price is contained in subsection 27H(4) of the Income Tax Assessment Act 1936 . It states that 'purchase price' includes the contributions made by a person to any foreign superannuation fund to obtain a pension and so much of contributions considered reasonable by the Commissioner as having been paid by a person to a foreign superannuation fund to obtain superannuation benefits including a pension. Where a client has income from a foreign pension or annuity they may be entitled to claim a deduction (deductible amount) to reduce the taxable amount of their pension or annuity. Only some foreign pensions and annuities have a UPP as not all individuals made personal contributions towards the purchase price of their pension or annuity that were either not through their employer or to a foreign superannuation fund. | Detailed Reasoning - Reference to contributions: Section 27H(4) of the Income Tax Assessment Act 1936 (ITAA 1936) provides the definition of purchase price to mean: (a) In relation to a pension - the sum of: (i) Contributions made by any person to a foreign superannuation fund to obtain the pension; and (ii) So much as the Commissioner considers reasonable of contributions made by any person to a foreign superannuation fund to obtain superannuation benefits including the pension; and (b) In relation to an annuity other than a pension - the sum of: (i) Payments made solely to purchase the annuity; and (ii) So much so the Commissioner considers reasonable of payments made to purchase the annuity and to obtain other benefits. Section 27H(5) provides further meaning to the definition of purchase price in subsection (4): (a) A reference to contributions made by any person to a foreign superannuation fund to obtain a pension does not include a reference to contributions made to a foreign superannuation fund by an employer, or by another person under an agreement to which the employer is a party, for the purpose of providing superannuation benefits for, or for dependants of, an employee of the employer; and (b) A reference to payments made to purchase, or solely to purchase, an annuity (other than a pension) does not include a reference to payments made by an employer, or by another person under an agreement to which the employer is a party, to purchase, or solely to purchase, the annuity for, of for dependants of, an employee of the employer. | Detailed Reasoning - Conclusion: A deductible amount for undeducted purchase price (UPP) arises only where a pension has been purchased using personal voluntary contributions that have not already attracted any form of tax relief. Contributions made by an employer, compulsory member contributions, or amounts made under salary sacrifice arrangements do not meet the legislative requirements to constitute a UPP. Having regard to the operation of the pension scheme, member contributions to the scheme are compulsory and are made under conditions where tax relief is available under the Foreign Country's tax system. In addition, the scheme documentation indicates that members are not able to make personal voluntary contributions that are excluded from tax relief arrangements. Contributions made under these circumstances do not fall within the meaning of contributions contemplated by subsection 27H(4) of the ITAA 1936, when read in conjunction with the exclusions set out in subsection 27H(5). Accordingly, as the contributions to the scheme consist of compulsory member contributions and employer-supported arrangements that attract tax relief, they do not constitute eligible contributions to form a purchase price for the purposes of section 27H. As a result, there is no identifiable undeducted purchase price component attributable to the pension. On this basis, the legislative requirements for a deductible amount under section 27H of the Income Tax Assessment Act 1936 are not satisfied.