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Edited version of private advice
Authorisation Number: 1051973551984
Date of advice: 21 April 2022
Subject: An 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:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You became a resident of Australian for taxation purposes.
You commenced a pension that is paid to you by foreign superannuation fund.
You have provided a letter from your foreign fund stating the amount of your personal contributions.
The pension is payable for life.
You currently receive 100% of the pension.
The pension is paid on monthly basis.
The pension is not a reversionary pension.
The residual capital value of pension is nil.
When the pension commenced you were xx years of age and your life expectancy factor is xx.
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
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 your client
(if all the pension is payable to you then A = 1)
B = is the amount of the UPP of the pension, which in your client's case is xx
C = is the residual capital value (if any), which in your client's case is nil
D = is the relevant number, which in your client's case is xx.
By putting your information into the above formula, your annual UPP deductible amount is xxx.
As per the above determination, your annual UPP deductible amount for your pension is xx.