Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012834931418

Date of advice: 10 July 2015

Ruling

Subject: Deductible amount of the undeducted purchase price of your foreign pension

Question 1

Are you entitled to a deductible amount in respect of your foreign pension?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2014 onwards

The scheme commences on:

On or after 1 July 1983

Relevant facts and circumstances

You are resident of Australia for income tax purposes.

Your pension is paid by a scheme maintained outside Australia.

Your pension commenced on or after 1 July 1983 and is payable for life.

You currently receive 100% of the pension and on your death it reverts to your spouse.

The residual capital value of the pension is nil.

Your pension is paid on a monthly basis.

Relevant legislative provisions

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 - currency translation

Income Tax Regulations 1936 Regulation 9

Income Tax Assessment Regulations 1997 Regulation 960-50.01 - currency translation

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 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 deductible amount is calculated using the following formula:

 

A (B - C)

D

A = relevant share of the pension payable to you (if all the pension is payable to you then A = 1)

B = is the amount of the UPP of the pension

C = is the residual capital value (if any)

D = is the relevant number.

By putting your information into the above formula, your annual deductible amount is obtained.

Converting foreign currency to Australian currency

Amounts in foreign currency must be translated into Australian currency at the applicable exchange rate.

As your pension is paid on a regular monthly basis, you are entitled to use the average exchange rate to translate your pension income and the deductible amount of your UPP.

The average exchange rates are available from our superannuation information line on 13 10 20 or visit our website at ato.gov.au/super

Other relevant comments

Please note that from 1 July 2007, the legislation changed in relation to superannuation pensions and benefits paid from complying superannuation funds. However, these changes do not affect any pensions paid from overseas funds which are not considered complying superannuation funds under section 42 of the Superannuation Industry (Supervision) Act 1993 as they are not resident funds.

You will need to include your total foreign pension income in your income tax return and claim your annual deductible amount as advised by your private ruling above.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).