ATO Interpretative Decision
ATO ID 2003/661 (Withdrawn)
Superannuation
Superannuation: Undeducted Purchase Price (UPP) - Foreign pension - lifetime pension commencing prior to 1 July 1983.FOI status: may be released
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This ATO ID is a simple restatement of the law and does not contain an interpretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the annual deductible amount of the UPP in relation to a foreign pension which commenced prior to 1 July 1983 calculated in accordance with section 26AA of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, the annual deductible amount of the UPP in relation to a foreign pension which commenced prior to 1 July 1983 is calculated in accordance with section 26AA of the ITAA 1936.
Facts
The taxpayer receives a pension from a retirement fund established and managed outside Australia.
The commencement date of the pension was prior to 1 July 1983.
The pension is payable for life.
The taxpayer has provided the total amount of contributions, other than employer contributions, paid to the retirement fund towards the purchase of the pension.
The international tax agreement between Australia and the country in which the retirement fund is established and managed provides that the pension is taxable in Australia.
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 for pensions commencing prior to 1 July 1983.
Under former paragraph 26AA(2)(a) of the ITAA 1936 for an annuity payable until the death of the taxpayer, or for a term that will not end before his death, the amount of UPP to be excluded from the assessable income of the taxpayer is calculated by the formula:
UPP ÷ life expectancy of taxpayer at commencement of pension
Pursuant to subsection 26AA(4) of the ITAA 1936, the UPP includes the amount the recipient of the pension or annuity has outlaid to purchase the pension or annuity, for which a tax deduction or rebate has not been allowed or is not allowable. Contributions made by any other person, other than the recipient, will not be taken into account in calculating the UPP.
Former Regulation 4A of the Income Tax Regulations 1936 (ITR 1936) stated that, for the purposes of the definition of life expectancy of the taxpayer in paragraph 26AA(2)(a) of the ITAA 1936, the Australian Life Tables are to be used. A person receiving an annuity or pension arising from the death of the original pensioner cannot claim a deduction for the UPP as the person would not have contributed to the purchase price.
Date of decision: 10 July 2003
Legislative References:
Income Tax Assessment Act 1936
section 20
section 26AA
subsection 27A(1)
regulation 4A
Related Public Rulings (including Determinations)
Taxation Ruling IT 2157
Taxation Ruling IT 2498
Taxation Determination TD 93/227
Keywords
Termination payments, superannuation & retirement income
Annuities & superannuation pensions
Annuity & superannuation pension purchase price
Undeducted purchase price
Superannuation pensions
Deductible amount
Foreign pension
ISSN: 1445-2782
| Date: | Version: | |
| 10 July 2003 | Original statement | |
| You are here | 16 April 2010 | Archived |