Private ruling: Undeducted purchase price of a foreign pension or annuity
Date of advice: 13 January 2021
Published: March 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 30 September 20XX

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension? | A1: Yes. The deductible amount has been calculated in accordance subsection 27H(2) and subsection 27H(3) of the Income Tax Assessment Act 1936.

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. Your pension is paid by a scheme maintained overseas You have provided a copy of emails from the fund to assist the Commissioner in determining the amount of your personal contributions You currently receive 100% of the pension and on your death it reverts to your spouse The residual capital value of the pension is nil. Your pension is paid on a monthly basis. Assumptions No assumptions have been used in this ruling as it is given on the basis of the facts and circumstances stated above.

Relevant legislative provisions: We took these laws into account: | Income Tax Assessment Act 1936 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 Regulations 1936 Regulation 9 Other references: | Taxation Determination TD 2006/17 | Taxation Determination TD 2006/54 | Taxation Determination TD 2006/72 | Important information to note | For the 2004-05 and later income years, income tax returns may be amended within two years from the date upon which the Commissioner gives notice of assessment. However, where assessments fall outside this period, you will need to lodge an objection and request an extension of time to lodge the objection. | The UPP deductible amount can only be included in your tax return if you have declared your pension income. When including these amounts, they should be translated to Australian currency using the same exchange rate. More information about exchange rates is available from our website by entering 'QC 16583' in the search box on the top right of the page.

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 C = is the residual capital value (if any) D = is the relevant number Your UPP deductible amount in respect of your foreign pension has been calculated using this formula. | Detailed Reasoning - This ruling applies for the following periods:: • Year ended 30 June 20XX • Year ended 30 June 20XX | Detailed Reasoning - The scheme commences on:: 30 September 20XX | Detailed Reasoning - Relevant facts and circumstances: You are a resident of Australia for income tax purposes. Your pension is paid by a scheme maintained overseas You have provided a copy of emails from the fund to assist the Commissioner in determining the amount of your personal contributions You currently receive 100% of the pension and on your death it reverts to your spouse The residual capital value of the pension is nil. Your pension is paid on a monthly basis. | Detailed Reasoning - Assumptions: No assumptions have been used in this ruling as it is given on the basis of the facts and circumstances stated above. | Detailed Reasoning - We took these laws into account:: Income Tax Assessment Act 1936 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 Regulations 1936 Regulation 9 | Detailed Reasoning - Other references:: Taxation Determination TD 2006/17 Taxation Determination TD 2006/54 Taxation Determination TD 2006/72 | Detailed Reasoning - Important information to note: For the 2004-05 and later income years, income tax returns may be amended within two years from the date upon which the Commissioner gives notice of assessment. However, where assessments fall outside this period, you will need to lodge an objection and request an extension of time to lodge the objection. The UPP deductible amount can only be included in your tax return if you have declared your pension income. When including these amounts, they should be translated to Australian currency using the same exchange rate. More information about exchange rates is available from our website by entering 'QC 16583' in the search box on the top right of the page.