Private ruling: Undeducted purchase price
Date of advice: 7 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: The scheme has commenced

Ruling: Q1: Are you entitled to a deductible amount in respect of your foreign pension? | A1: Yes, your annual deductible amount and part year deductible amount has been calculated in accordance with subsection 27H (2) of the Income Tax Assessment Act 1936 (ITAA 1936).

Relevant facts and circumstances: You are a resident of Australia for income tax purposes Your pension is paid by a pension scheme established and managed outside Australia You have provided evidence which shows you paid personal contributions Your pension commenced on dd/mm/yyyy and is payable for the life On your death, 66% of the pension reverts to your spouse Your 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) ATO view documents: | Taxation Ruling IT 2620 | Taxation Ruling IT 2272

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 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), which in your case is 0 D = is the relevant number | Detailed Reasoning - Part year calculation: A pro-rated amount applies for the first year. | Detailed Reasoning - This ruling applies for the following period:: Year ended 30 June 2014 Year ended 30 June 2015 | Detailed Reasoning - The scheme commenced on:: The scheme has commenced | Detailed Reasoning - Relevant facts and circumstances: You are a resident of Australia for income tax purposes Your pension is paid by a pension scheme established and managed outside Australia You have provided evidence which shows you paid personal contributions Your pension commenced on dd/mm/yyyy and is payable for the life On your death, 66% of the pension reverts to your spouse Your pension is paid on a monthly basis. | 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(4) | Detailed Reasoning - ATO view documents:: Taxation Ruling IT 2620 Taxation Ruling IT 2272