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Edited version of private advice
Authorisation Number: 1051828543254
Date of advice: 20 April 2021
Ruling
Subject: Undeducted purchase price of a foreign pension or annuity
Question
Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension?
Answer
Yes
This ruling applies for the following period:
Income year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The taxpayer is a resident of Australia for income tax purposes.
The taxpayer's pension is paid by a pension scheme maintained in the Country A.
The taxpayer has provided us with information from their pension scheme stating the amount of their personal contributions.
The taxpayer's pension commenced on 1 July 20XX and is payable for life
The taxpayer currently receives 100% of the pension
The residual capital value of the pension is nil
The taxpayer was 65 years of age when they commenced their pension.
The taxpayer's 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(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 UPP 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 UPP 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, which in your case is £xx
C = is the residual capital value (if any), which in your case is £0.00
D = is the relevant number, which in your case is xx
By putting your information into the above formula, your annual UPP deductible amount is £xx.
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