Private ruling: Undeducted purchase price of a foreign pension or annuity.
Date of advice: 5 April 2023
Published: 5 June 2023
Ruling period: 30 June 20XX
Date scheme commenced: 1 June 20XX

Ruling: Q1: Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension? | A1: Yes. The deductible amount has been calculated in accordance with the formula under subsection 27H(2) of the Income Tax Assessment Act 1936

Relevant facts and circumstances: The taxpayer is a resident of Australia for income tax purposes. The taxpayer's pension is paid by a scheme maintained in Country A. The taxpayer has provided a letter from their pension scheme outlining your personal contributions The taxpayer's pension commenced on 1 June 20XX and is payable for life. The taxpayer currently receives 100% of the pension The taxpayer's pension commenced when they were XX years of age. The taxpayer's pension is paid on a monthly basis.

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(4) | Income Tax Regulations 1936 Regulation 9

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: 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), which in your case is nil D = is the relevant life expectancy factor number. By putting your information into the above formula, your part year and annual UPP deductible amounts had been determined.