Private ruling: Undeducted purchase price
Date of advice: 8 July 2025
Published: 1 September 2025
Ruling period: 30 June 2025
Date scheme commenced: DD/MM/YYYY

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, you are not eligible for a UPP deductible amount.

Relevant facts and circumstances: This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a resident of Australia for income tax purposes. Your pension is paid by the Fund a scheme maintained in XXXX. You have provided documentation from the fund to assist the Commissioner in determining the amount of your personal contributions. You have provided a letter from Fund stating your voluntary purchases are XXXX Your pension commenced on DDMMYYYY and is payable for life. You currently receive XXXX 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.

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. Contributions that make up the undeducted purchase price of the foreign pension or annuity are contributions not made through your employer or have any association with your employer. They are contributions made separately to purchase your pension for the sole purpose of retirement. | Detailed Reasoning - Meaning of 'foreign superannuation fund': A 'foreign superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as follows: (a) a superannuation fund is a foreign superannuation fund at a time if the fund is not an Australian superannuation fund at that time; and (b) a superannuation fund is a foreign superannuation fund for an income year if the fund is not an Australian superannuation fund for the income year. A superannuation fund has the meaning given by subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 (SISA), which requires that the fund is a 'provident, benefit, superannuation or retirement fund'. | Detailed Reasoning - Meaning of 'superannuation fund': Subsection 10(1) of the SISA states: superannuation fund means: (a) a fund that: i. is an indefinitely continuing fund; and ii. is a provident, benefit, superannuation or retirement fund; or (b) a public sector superannuation scheme. Whether the Fund is a foreign superannuation fund, the meaning of the term 'provident, benefit, superannuation or retirement fund' needs to be considered. In the context of considering the term 'provident, benefit or superannuation fund established for the benefit of employees', in former subparagraph 23(j)(i) of the ITAA 1936, the Full Bench of the High Court in Mahony v Commissioner of Taxation (Cth) (1967) 41 ALJR 232; (1967) 14 ATD 519 ( Mahony ) considered that this phrase denoted 'a purpose narrower than the conferral of benefits in a completely general sense' and had to be characterised by 'some specific future purpose'. In the case of a provident fund, against 'contemplated contingencies; in the case of a superannuation fund 'on retirement, death or cessation of employment'; and, in the case of a benefit fund 'a benefit characterised by some specific future purpose' (e.g. a funeral fund). In considering the term 'provident, benefit, superannuation or retirement fund' as it now appears in the definition of 'superannuation fund' in subsection 10(1) of the SISA, Senior Member FD O'Loughlin in Baker v. FC of T [2015] AATA 469 ( Baker ) stated at [16]: Accordingly, a trust arrangement that is not a provident fund, benefit fund or retirement fund, that allows for payment of superannuation styled benefits and other benefits not permitted by the Supervision Act will not be a superannuation fund. | Detailed Reasoning - Conclusion: The purpose of the fund must be solely consistent with it being a 'provident, benefit or superannuation fund'. In this case, the fund allows for withdrawal of benefits at a time before retirement. Early withdrawal for home ownership programs, early retirement options and early withdrawal of funds at any age would imply the foreign fund is not purely for the sole purpose of retirement. Whilst the Fund satisfies some of the requirements of a foreign superannuation fund, it seems they are not exclusively a provident, benefit or superannuation fund because they do not provide benefits for the specific purpose of the individual's retirement. Therefore, in circumstances where the Fund permits withdrawal of benefits for purposes not solely consistent with the fund being a 'superannuation fund', the Fund cannot be a 'foreign superannuation fund' as defined in subsection 995-1(1) of the ITAA 1997. To be eligible for a UPP deductible amount, contributions made to purchase the pension must be to a foreign superannuation fund, as stated in the definition of purchase price in section 27(4) of the ITAA 1936.