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: 1051936338943
Date of advice: 19 January 2022
Subject: Undeducted purchase price of a foreign pension
Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension?
This ruling applies for the following period:
30 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 a scheme maintained in foreign country.
You have provided a letter from the foreign fund stating the amount of your personal contributions.
Your pension commenced on the provided date and is payable for life.
You currently receive 100% of the pension and on your death it reverts to your spouse.
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.
When the pension commenced your spouse was XX years of age and their life expectancy factor was XX.XX.
Your pension is paid on a quarterly 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 TR 2002/17
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.
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)
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 number, which in your case is XX.XX.
By putting your information into the above formula, your part year and annual UPP deductible amounts had been determined.