Private ruling: Undeducted Purchase Price (UPP) of your foreign pension
Date of advice: 17 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 August 20XX

Ruling: Q1: Are you entitled to a deductible amount in respect of the UPP of your foreign pension? | A1: Yes, your deductible amount has been calculated in accordance with subsection 27H(2) of the Income Tax Assessment Act 1936 (ITAA 1936). This ruling is binding on the Commissioner for the period outlined in the ruling. You may rely on this ruling for future years where the facts, as stated in the ruling do not change but the Commissioner will not be bound to the ruling.

Relevant facts and circumstances: You receive a pension from a retirement fund established and managed outside Australia. The international tax agreement between Australia and the country in which the retirement fund is established and managed provides that the pension is taxable in Australia. Your assessable income includes your pension income. All the pension is payable to you. The pension became payable on or after 1 July 1983 The pension is payable for life. You provided evidence to assist the Commissioner, calculate the total amount of personal contributions paid to the retirement fund towards the purchase of the pension. The residual capital value is nil. Your pension is paid on a regular basis

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 27H | Income Tax Assessment Act 1936 Subsection 27H(2) | 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

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 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 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. | Detailed Reasoning - This ruling applies for the following periods:: Year ended 30 June 2014 Year ended 30 June 2015 | Detailed Reasoning - The scheme commenced on:: 1 August 20XX | Detailed Reasoning - Relevant facts and circumstances: You receive a pension from a retirement fund established and managed outside Australia. The international tax agreement between Australia and the country in which the retirement fund is established and managed provides that the pension is taxable in Australia. Your assessable income includes your pension income. All the pension is payable to you. The pension became payable on or after 1 July 1983 The pension is payable for life. You provided evidence to assist the Commissioner, calculate the total amount of personal contributions paid to the retirement fund towards the purchase of the pension. The residual capital value is nil. Your pension is paid on a regular basis | Detailed Reasoning - Relevant legislative provisions: Income Tax Assessment Act 1936 Section 27H Income Tax Assessment Act 1936 Subsection 27H(2) 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