Private ruling: Deductible amount of the undeducted purchase price of your foreign pension
Date of advice: 8 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deductible amount in respect of your foreign pension? | A1: Yes

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 received 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. All the pension is payable to you. Your pension is paid on a monthly basis. Assumptions No assumptions have been used in this ruling as it is given on the basis of the facts and circumstances stated above.

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) | 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 2554 | Taxation Ruling IT 2498 | Taxation Ruling IT 2498A - Addendum | Other references: | 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. In recognition of the difficulties Country X pensioners face in obtaining information relating to their contributions to the fund, Taxation Ruling IT 2554 Income tax: Australia/Country X double taxation agreement: Country X pensions derived by Australian residents allows for the following alternative formula to be used to calculate the deductible amount. (amount of contributive portion for XXXX and YYYY calendar years) X 90% 2 It must be noted that the contributive portion supplied on the Article 10 letters issued by the fund are based on calendar years. Therefore, to calculate the deductible amount for each Australian financial year, two years' statements are required. The contributive portion (reduced by 10% to reflect the interest element in that component of the pension) is the annual exclusion amount. The deductible amount for your pension has been calculated in accordance with the relevant formula. | Detailed Reasoning - This ruling applies for the following period:: Year ended 30 June 2016 | Detailed Reasoning - The scheme commenced on:: 1 July 2015 | 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 received 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. All the pension is payable to you. Your pension is paid on a monthly basis. | Detailed Reasoning - Assumptions: No assumptions have been used in this ruling as it is given on the basis of the facts and circumstances stated above. | 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) 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 2554 Taxation Ruling IT 2498 Taxation Ruling IT 2498A - Addendum | Detailed Reasoning - Other references:: 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.