Edited version of your private ruling

Authorisation Number: 1012568328067

Ruling

Subject: the undeducted purchase price of your foreign pension

Question

Are you entitled to a deductible amount in respect of the undeducted purchase price (UPP) of your foreign pension?

Ruling

No.

This ruling is binding on the Commissioner for the period outlined in the ruling. You may rely on this ruling for future years where the facts, as stated in the ruling do not change, but the Commissioner will not be bound to the ruling. This means that if your circumstances or the facts relied upon to make the ruling do change, you will be protected from penalties and interest, but liable for any shortfall tax that may apply.

This ruling applies for the following period

2012-13 financial year

The scheme commenced

On or after 1 July 1983

Relevant facts:

You receive a pension from a retirement fund established and managed outside Australia.

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.

Your assessable income includes your pension income.

All the pension is payable to you.

The pension became payable on or after 1 July 1983.

You did not make any personal contributions towards the purchase of the pension.

Assumptions

This ruling is given on the basis of the facts stated in the description of the scheme as set out above. Any material variation from these facts (including any matters not stated in the description above and any departure from these facts) will mean that the ruling will have no effect. Examples of such variations include but are not limited to commutation, divorce and re-marriage. No entity will then be able to rely on this ruling as the Commissioner will consider that the scheme has been implemented in a way that is materially different from the scheme described.

Relevant legislative and regulatory provisions:

Income Tax Assessment Act 1936 Section 27H

Income Tax Assessment Act 1936 Subsection 27H(4)

Reasons for decision

Explanation

Please note that all references to 'pension' cover both pensions and annuities

Summary

In your case, you are not entitled to a deductible amount because you have not personally contributed to the fund.

Deductible amount

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 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.

The definition of 'purchase price' is contained in subsection 27H(4) of the ITAA 1936. It states that purchase price includes the contributions made by a person to any foreign superannuation fund to obtain a pension and so much of contributions considered reasonable by the Commissioner as having been paid by a person to a foreign superannuation fund to obtain superannuation benefits including a pension.

In your case, a letter from your fund confirmed that you did not make any personal contributions. As you did not make any personal contributions to the purchase of your pension, you are not entitled to a deductible amount of UPP.

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