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This edited version has been archived due to the length of time since original publication.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: 1013065138262

Date of advice: 8 August 2016

Ruling

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

Question

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

Answer

Yes

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.

In recognition of the difficulties Country X pensioners face in obtaining information relating to their contributions to the fund, Taxation Ruling IT 2554 Income tax: Australia/Country X double taxation agreement: Country X pensions derived by Australian residents allows for the following alternative formula to be used to calculate the deductible amount.

(amount of contributive portion for XXXX and YYYY calendar years)

X

90%

2

It must be noted that the contributive portion supplied on the Article 10 letters issued by the fund are based on calendar years. Therefore, to calculate the deductible amount for each Australian financial year, two years' statements are required. The contributive portion (reduced by 10% to reflect the interest element in that component of the pension) is the annual exclusion amount.

The deductible amount for your pension has been calculated in accordance with the relevant formula.

This ruling applies for the following period:

Year ended 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

This ruling is based on the facts stated below. 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. Where there is no variation, the ruling can apply for more than just the period/s mentioned above.

You are resident of Australia for income tax purposes

You received 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.

All the pension is payable to you.

Your pension is paid on a monthly basis.

Assumptions

No assumptions have been used in this ruling as it is given on the basis of the facts and circumstances stated above.

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

ATO view documents:

Taxation Ruling IT 2554

Taxation Ruling IT 2498

Taxation Ruling IT 2498A - Addendum

Other references:

Taxation Determination TD 2006/54

Important information to note

The deductible amount can only be included in your tax return if you have declared your pension income. When including these amounts, they should be translated to Australian currency using the same exchange rate. More information about exchange rates is available from our website by entering 'QC 16583' in the search box on the top right of the page.


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