Private ruling: Request for a determination of the deductible amount of UPP of a foreign pension or annuity
Date of advice: 14 October 2015
Published: October 2015

Ruling: Q1: Are you entitled to a deductible amount in respect of your foreign pension? | A1: Yes, your annual deductible amount has been calculated in accordance with subsection 27H(2) of the ITAA 1936 legislation.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 27H | Income Tax Assessment Act 1936 Subsection 27H(1)(a) | Income Tax Assessment Act 1936 Subsection 27H(2) | Income Tax Assessment Act 1936 Subsection 27H(4) | Income Tax Assessment Act 1997 Section 960-50 - currency translation | Income Tax Regulations 1936 Regulation 9 | Income Tax Assessment Regulations 1997 Regulation 960-50.01 - currency translation ATO view documents: | Taxation Ruling IT 2498 | Taxation Ruling IT 2498A - Addendum | Other references: | Taxation Determination TD 2006/17 | Taxation Determination TD 2006/54 | Important information to note | The 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 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 By putting your information into the above formula, your annual deductible amount is obtained. | Detailed Reasoning - Part year calculation: A pro-rated amount has been calculated as the pension paid in the first year was for less than a full year. | Detailed Reasoning - Relevant legislative provisions: Income Tax Assessment Act 1936 Section 27H Income Tax Assessment Act 1936 Subsection 27H(1)(a) Income Tax Assessment Act 1936 Subsection 27H(2) Income Tax Assessment Act 1936 Subsection 27H(4) Income Tax Assessment Act 1997 Section 960-50 - currency translation Income Tax Regulations 1936 Regulation 9 Income Tax Assessment Regulations 1997 Regulation 960-50.01 - currency translation | Detailed Reasoning - ATO view documents:: Taxation Ruling IT 2498 Taxation Ruling IT 2498A - Addendum | Detailed Reasoning - Other references:: Taxation Determination TD 2006/17 Taxation Determination TD 2006/54 | Detailed Reasoning - Important information to note: The 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.