Edited version of Private Advice

Authorisation number: 1052311207904

Date of advice: 1 October 2024

Ruling

Subject: Undeducted purchase price

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 2024

Relevant facts and circumstances

You are a resident of Australia for income tax purposes.

Your pension is paid by a scheme maintained in Country A.

You have provided a copy of your member statements from the fund to assist the Commissioner in determining the amount of your personal contributions.

Your pension commenced on 1 July 20XX and is payable for a fixed term of XX years.

You currently receive 100% of the pension.

The residual capital value of the pension is nil.

When the pension commenced you were XX years of age and your life expectancy factor was XX.

There is no lump sum payable when the fixed term pension expires.

Your pension is paid on a monthly basis.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Former subsection 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 Assessment (1936 Act) Regulation 2015 section 9

Income Tax Assessment (1997 Act) Regulations 2021 section 960-50.01

We followed these ATO view documents

Taxation Ruling IT 2498

Taxation Ruling IT 2498A - Addendum

Other references

Taxation Determination TD 2006/17

Taxation Determination TD 2006/54

Taxation Determination TD 2006/72

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.

The definition of purchase price is contained in subsection 27H(4) of the Income Tax Assessment Act 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.

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 GBP XX

C = is the residual capital value (if any), which in your case is GPB 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 GBP XX

Conclusion

As per the above determination, your UPP deductible amount for the fixed term years is GBP XX.

Please note that the UPP deductible amount for the full financial years will remain the same provided the details relating to the UPP determination remain unchanged.

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