ATO Interpretative Decision
ATO ID 2001/296
Superannuation
Superannuation: Undeducted Purchase Price (UPP) - lifetime pension commenced before 1 July 1983FOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
How is the annual deductible amount of the UPP calculated in relation to a lifetime superannuation pension paid from a complying superannuation fund where the pension commenced to be paid before 1 July 1983?
Decision
The annual deductible amount of the superannuation pension is ascertained in accordance with former section 26AA of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer receives a pension from a complying superannuation fund.
The pension is payable for life.
The pension became payable before 1 July 1983.
Reasons for Decision
Former section 26AA of the ITAA 1936 allows the UPP of an annuity to be excluded from the assessable income of the taxpayer. A pension is an annuity for the purposes of the section.
Under former subsection 26AA(2)(a) for an annuity payable until the death of the taxpayer, or for a term that will not end before his death, the annual amount of the UPP to be excluded from the assessable income of the taxpayer is calculated by the formula:
Undeducted Purchase Price / Life expectancy of taxpayer at the commencement of pension
For the purpose of subsection 26AA(2)(a), the life expectancy is ascertained with reference to the Australian Life Tables published by the Commonwealth Statistician, as prescribed by former regulation 4A of the Income Tax Regulations..
The UPP means the amount the recipient of the pension or annuity has outlaid to purchase the pension or annuity, for which no tax deduction or rebate was allowed or allowable. The deductible amount has been calculated in accordance with section 26AA ITAA 1936.
Date of decision: 26 June 2001
Legislative References:
Income Tax Assessment Act 1936
Section 26AA
subsection 26AA(2)(a)
regulation 4A
Keywords
Undeducted purchase price
Superannuation pensions
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 26 June 2001 | Original statement |
| 30 April 2010 | Archived |