Private ruling: Foreign pension
Date of advice: 5 December 2017
Published: April 2018

Ruling: Q1: Are you entitled to a deductible amount in respect of your foreign pension? | A1: Yes. The deductible amount is calculated in accordance with subsections 27H(2) and 27H(3) of the Income Tax Assessment Act 1936 .

Relevant facts and circumstances: This ruling is based on the facts stated below. Any material variation from these facts (including any matters not stated in the description above and any departure from these facts) will mean that the ruling will have no effect. Where there is no variation, the ruling can apply for more than just the period/s mentioned above. ● You are resident of Australia for income tax purposes ● You have provided a copy of a statement from the fund to assist the Commissioner in determining the amount of your personal contributions ● The residual capital value of the pension is nil ● Your pension is paid on a monthly basis. ATO view documents: Taxation Determination 2006/17

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(3) 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 undeducted purchase price (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 - Relevant facts and circumstances: This ruling is based on the facts stated below. Any material variation from these facts (including any matters not stated in the description above and any departure from these facts) will mean that the ruling will have no effect. Where there is no variation, the ruling can apply for more than just the period/s mentioned above. ● You are resident of Australia for income tax purposes ● You have provided a copy of a statement from the fund to assist the Commissioner in determining the amount of your personal contributions ● The residual capital value of the pension is nil ● Your pension is paid on a monthly basis. | Detailed Reasoning - ATO view documents:: Taxation Determination 2006/17 | 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(3) | 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.