Private ruling: Foreign pension lump sum
Date of advice: 11 December 2017
Published: April 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

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

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. Your pension is paid from a scheme maintained in country X. You have provided a letter stating the amount of your personal contributions. Your pension plan commenced in the current financial year. You control the frequency and how much (if any) is paid each year. You currently receive 100% of the pension.

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)

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. An annual deductible amount can be claimed where a pension is paid for the entire year, whereas a ‘pro-rated’ amount applies if the pension is paid for part of the year. The deductible amount 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 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, which in your case is X. C = is the residual capital value (if any), which in your case is nil. D = is the relevant number, which in your case is Y. By putting your information into the above formula, your annual deductible amount is X. | Detailed Reasoning - Part year calculation: As your pension was paid for part of the relevant financial year, a pro-rated amount applies for that year.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.