Private ruling: Deductible amount of UPP of a foreign pension or annuity
Date of advice: 29 November 2018
Published: March 2019

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) 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 a resident of Australia for income tax purposes ● Your pension is paid by a foreign superannuation fund ● You have provided a copy of a letter to assist the Commissioner in determining the amount of your personal contributions ● Your pension commenced in the 2013-14 financial year and is payable for life ● Your became a Australian resident for Tax purposes in the 2017-18 financial year ● You currently receive 100% of the pension and on your death it reverts to your spouse ● The total amount of your personal contributions had been provided ● The residual capital value of the pension is nil. ● The appropriate life expectancy factor was used to calculate your UPP deductible amount. ● 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. We took these laws into account: Income Tax Assessment Act 1936 Subsection 27H(3) Income Tax Assessment Act 1936 Subsection 27H(4) Other references: Taxation Determination TD 2006/17 Taxation Determination TD 2006/54 Taxation Determination TD 2006/72 Important information to note The UPP 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 UPP 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 UPP deductible amount is calculated using the following formula: | Detailed Reasoning - 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 a resident of Australia for income tax purposes ● Your pension is paid by a foreign superannuation fund ● You have provided a copy of a letter to assist the Commissioner in determining the amount of your personal contributions ● Your pension commenced in the 2013-14 financial year and is payable for life ● Your became a Australian resident for Tax purposes in the 2017-18 financial year ● You currently receive 100% of the pension and on your death it reverts to your spouse ● The total amount of your personal contributions had been provided ● The residual capital value of the pension is nil. ● The appropriate life expectancy factor was used to calculate your UPP deductible amount. ● 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 - We took these laws into account:: Income Tax Assessment Act 1936 Subsection 27H(3) Income Tax Assessment Act 1936 Subsection 27H(4) | Detailed Reasoning - Other references:: Taxation Determination TD 2006/17 Taxation Determination TD 2006/54 Taxation Determination TD 2006/72 | Detailed Reasoning - Important information to note: The UPP 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.