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Edited version of private ruling
Authorisation Number: 1011553018726
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Question
Are you entitled to an annual and part year deductible amount in respect of the Undeducted Purchase Price (UPP) of your foreign pension?
Ruling
Yes, your annual deductible amount has been calculated in accordance with subsection 27H(2) of the Income Tax assessment act 1936 (ITAA1936)
The scheme commenced on
On or after 1July 1983
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
o You receive a pension from a retirement fund established and managed outside Australia.
o There is no Taxation Ruling or Taxation Determination published which provides for an alternative calculation or Commissioner's discretion under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936).
o The international tax agreement between Australia and the country in which your fund was established and is managed provides that the pension is taxable in Australia.
o Your assessable income includes your pension income.
o The pension became payable on or after 1 July 1983.
o The pension is payable for life and is non reversionary
o All the pension is payable to you.
o You have provided evidence to assist the Commissioner in determining the amount of your personal contributions.
o The residual capital value of the pension is nil.
o Your pension is paid on a monthly basis.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 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 Regulations 1936 Regulation 9
Income Tax Assessment Regulation 1997 Regulation 960-50.01
Reasons for decision
Please note that all references to 'pension' cover both pensions and annuities
Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) operates to include in assessable income the amount of any pension derived by a taxpayer during a year of income reduced by the annual deductible amount.
The deductible amount is deemed to be a return of part of your contribution towards the purchase of the pension.
The deductible amount is calculated based on the undeducted purchase price (UPP) of your pension.
The UPP is the amount you contributed towards the purchase price of your pension for which you did not claim, and were not eligible to claim, a tax deduction in Australia. Contributions made by an employer or by another person under an agreement to which the employer was a party, cannot form part of the UPP of the pension.
Under subsection 27H(2) of the ITAA 1936 and subject to subsection 27H(3) or (3A) of the ITAA 1936, the annual deductible amount of a superannuation pension is ascertained in accordance with the formula:
A (B - C) |
D |
where:
A = is the relevant share of the pension payable to the taxpayer in relation to the year
of income (if all of the pension is payable to the taxpayer, A = 1)
B = is the amount of the UPP of the pension
C = is the residual capital value, and
D = is the relevant number in relation to the pension.
Under subsection 27H(4) of the ITAA 1936, when a pension is payable during the lifetime of a person, the 'life expectation factor' is to be used as the relevant number.
Regulation 9 of the Income Tax Regulations 1936 states that for the purposes of the definition of life expectation factor in subsection 27H(4) of the ITAA 1936, the Australian Life Tables published by the Australian Government Actuary are to be used.
The factors for determining the life expectancy are:
o the date the pension first became payable;
o your age when the pension commenced;
o your spouses age when the pension commenced
Your UPP deductible amount has therefore been calculated in accordance with the formula contained in subsection 27H(2) ITAA 1936
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