Edited version of your private ruling

Authorisation Number: 1012541656893

Ruling

Subject: Undeducted Purchase Price (UPP) of your foreign lump sum payment

Question

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

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 received a superannuation lump sum payment from a fund established and managed outside Australia.

The international tax agreement between Australia and the country in which the fund is established and managed provides that the superannuation lump sum is taxable in Australia.

All the superannuation lump sum is payable to you.

The superannuation lump sum was your first and final payment from the fund.

You do not receive a pension or annuity from this fund.

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)

Superannuation Industry (Supervision) Act 1993 Section 10

Superannuation Industry (Supervision) Regulations 1994 Regulation 1.05(1)

Superannuation Industry (Supervision) Regulations 1994 Regulation 1.05(11A)

Superannuation Industry (Supervision) Regulations 1994 Regulation 1.06(1)

Superannuation Industry (Supervision) Regulations 1994 Regulation 1.06(9A)

Reasons for decision

Explanation

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

Summary

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 deductible amount, the calculation of which is based on the UPP of your pension or annuity.

In your case, you are not entitled to a deductible amount because you did not receive a pension or annuity from your fund. For the payment to successfully meet the definition of a pension or annuity, you must receive regular ongoing payments on at least an annual basis. You received a superannuation lump sum which was your first and final payment from the fund

The definitions for 'pension' and 'annuity' are provided below.

Section 27H(4) of the ITAA36 defines 'annuity' as including a pension paid from a foreign superannuation fund.

Section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA 1993) also defines "annuity" as: "a benefit provided by a life insurance company or a registered organisation, if the benefit is taken, under the regulations, to be an annuity for the purposes of this Act."

Regulation 1.05(1) of the Superannuation Industry (Supervision) Regulations 1994 (SISA 1994) states that "A benefit that is provided by a life insurance company or a registered organisation is taken to be an annuity for the purposes of the Act if:

(a) It arises under a contract that:

(i) Meets the standards of subregulation (11A)…

Subregulation 1.05(11A) provides that "A contract for the provision of a benefit (the annuity) meets the standards of this subregulation if the contract ensures that payment of the annuity is made at least annually…"

Likewise, Section 10 of the SISA 1993 also defines "pension" as "Except in the expression old-age pension, includes a benefit provided by a fund, if the benefit is taken, under the regulations, to be a pension for the purposes of this Act."

Regulation 1.06(1) of the SISR 1994 states that "A benefit is taken to be a pension for the purposes of the Act if:

(a) it is provided under rules of a superannuation fund that:

(i) meets the standards of subregulation (9A)…

Subregulation 1.06(9A) states that "Rules for the provision of a benefit (the pension) meet the standards of this subregulation if the rules ensure that payment of the pension is made at least annually…"

As your lump sum superannuation payment was a first and final payment from the fund, and is not a regular payment received on at least an annual basis, we have determined that you are not entitled to a deductible amount of UPP of a foreign pension or annuity, as you did not receive a foreign pension or annuity from the fund.