Private ruling: Undeducted purchase price of a foreign pension or annuity.
Date of advice: 20 August 2025
Published: 20 October 2025
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension? | A1: Yes.

Relevant facts and circumstances: The taxpayer is a resident of Australia for income tax purposes. The taxpayer's pension is paid by a scheme maintained in a foreign country. The taxpayer has provided a letter from their pension scheme outlining their personal contributions. The taxpayer's pension commenced on XXXX and is payable for life. The taxpayer currently receives XX of the pension. The taxpayer's pension commenced when they were XX years of age. The taxpayer's pension is paid on XXXX 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 (1997 Act) Regulations 2021 Section 960-50.01 | Superannuation Industry (Supervision) Regulations 1994 Schedule 1B Other references | Taxation Determination TD 2006/17 | Taxation Determination TD 2006/54

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. 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. 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 Where: • 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 By putting your information into the above formula, your annual UPP deductible amount is XXXX | Detailed Reasoning - Part year calculation: As your pension was paid for XXXX days in the XXXX income year, a pro-rated amount of XXXX applies for that year. | Detailed Reasoning - Conclusion: As per the above determination, your annual UPP deductible amount for the relevant income year is in foreign currency value. 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.