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You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1051944303492

Date of advice: 31 January 2022

Ruling

Subject:Undeducted purchase price (UPP) deductible amount for foreign pension or annuity.

Question

Are you entitled to an UPP deductible amount in respect of your foreign pension?

Answer

Yes

This ruling applies for the following period:

Year ended June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a resident of Australia for income tax purposes.

Your pension is paid by foreign superannuation fund.

You have provided a letter from your foreign fund stating the amount of your personal contributions.

Your pension is payable for life.

You currently receive 100% of the pension.

The residual capital value of the pension is nil.

When the pension commenced you were XX years of age and your life expectancy factor was XX.XX.

Your pension is paid on a monthly basis.

Relevant legislative provisions

Income Tax Assessment Act 1936 former subsection 27A(1)

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

Income Tax Assessment (1936 Act) Regulation 2015 section 9

Income Tax Assessment (1997 Act) Regulations 2021 section 960-50.01

We followed these ATO view documents

Taxation Ruling IT 2498

Taxation Ruling IT 2498A - Addendum

Other references

Taxation Determination TD 2006/17

Taxation Determination TD 2006/54

Taxation Determination TD 2006/72

Reasons for decision

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.

The definition of purchase price is contained in subsection 27H(4) of the Income Tax Assessment Act 1936. It states that 'purchase price' includes the contributions made by a person to any foreign superannuation fund to obtain a pension and so much of contributions considered reasonable by the Commissioner as having been paid by a person to a foreign superannuation fund to obtain superannuation benefits including a pension.

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, which in your case is foreign currency value

C = is the residual capital value (if any), which in your case is nil

D = is the relevant number, which in your case is XX.XX

By putting your information into the above formula, your annual UPP deductible amount is foreign currency value.

Conclusion

As per the above determination, your annual UPP deductible amount for the relevant income year is foreign currency value.