Private ruling: UPP - deductible amount for foreign pension
Date of advice: 20 November 2024
Published: 13 January 2025
Date scheme commenced: The scheme commences on 1 January 20XX

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension? | A1: Yes, your annual UPP deductible amount for the 20XX income year is XXX. Your part year UPP deductible amount for the 20XX income year is XXX. This private ruling applies for the following period: Income year ended 30 June 20XX Income year ended 30 June 20XX

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. Your pension is paid by XXX, a scheme maintained in XXX You have provided a copy of your XXX from the fund to assist the Commissioner in determining the amount of your personal contributions. Your pension commenced on XXX and is payable for life. You currently receive X% of the pension and on your death, it reverts to your spouse. The residual capital value of the pension is nil. When the pension commenced you were X years of age and your life expectancy factor was XX. When the pension commenced your spouse was X years of age and their 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 Reason for Decision | The part of your annual pension or annuity income which represents a return to you of your personal contributions is free from tax. The tax-free portion is called the UPP deductible amount. | It is calculated by dividing the UPP of your pension by either the term of the pension (if fixed), or a life expectancy factor - that applies to you or your spouse if they have a greater life expectancy - according to life expectancy statistics. | The Australian life tables are published by the Australian Government Actuary, and the life expectancy is taken from when the pension first became payable. | The annual UPP deductible amount is calculated using the following formula: | A (B - C) ÷ D | A = relevant share of the pension payable to you | (if all the pension is payable to you then A = 1) | B = is the amount of the UPP of the pension, which in your case is XXX | C = is the residual capital value (if any), which in your case is nil. | D = is the relevant number, which in your case is XX | By putting your information into the above formula, your annual UPP deductible amount is XX | Part year calculation | As your pension was paid for XX days in the 20XX income year, a pro-rated amount of XXX applies for that year. | Conclusion | As per the above determination, your annual UPP deductible amount for the 20XX-XX and subsequent full income year is XXX | Your part year UPP deductible amount for the 20XX-XX income year is XXX. | Please note that the UPP deductible amount for the full financial year will remain the same provided the details relating to the UPP determination remain unchanged.

Reasons for decision: Summary: The part of your annual pension or annuity income which represents a return to you of your personal contributions is free from tax. The tax-free portion is called the UPP deductible amount. It is calculated by dividing the UPP of your pension by either the term of the pension (if fixed), or a life expectancy factor - that applies to you or your spouse if they have a greater life expectancy - according to life expectancy statistics. The Australian life tables are published by the Australian Government Actuary, and the life expectancy is taken from when the pension first became payable. The annual UPP deductible amount is calculated using the following formula: A (B - C) ÷ D A = relevant share of the pension payable to you (if all the pension is payable to you then A = 1) B = is the amount of the UPP of the pension, which in your case is XXX C = is the residual capital value (if any), which in your case is nil. D = is the relevant number, which in your case is XX By putting your information into the above formula, your annual UPP deductible amount is XX | Detailed Reasoning - Part year calculation: As your pension was paid for XX days in the 20XX income year, a pro-rated amount of XXX applies for that year. | Detailed Reasoning - Conclusion: As per the above determination, your annual UPP deductible amount for the 20XX-XX and subsequent full income year is XXX Your part year UPP deductible amount for the 20XX-XX income year is XXX. Please note that the UPP deductible amount for the full financial year will remain the same provided the details relating to the UPP determination remain unchanged.