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Edited version of your written advice
Authorisation Number: 1012810771723
Ruling
Subject: Undeducted Purchase Price (UPP) of your foreign pension
Question 1
Are you entitled to a deductible amount in respect of the UPP of your foreign pension?
Answer
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 periods:
2010 - 11 financial year
2011 - 12 financial year
2012 - 13 financial year
2013 - 14 financial year
The scheme commences on:
On or after 1 July 1983
Relevant facts and circumstances
You receive 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.
Your assessable income includes your pension income.
The pension is payable to you.
No personal contributions were made towards the purchase price of the pension.
The pension became payable on or after 1 July 1983.
The pension is payable for life.
The residual capital value of the pension is nil.
Your pension is paid on a monthly basis.
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 provisions
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1936 Subsection 27H(1)
Income Tax Assessment Act 1936 Subsection 27H(2)
Income Tax Assessment Act 1936 Subsection 27H(4)
Income Tax Assessment Act 1936 Subsection 27H(5)
Income Tax Regulations 1936 Regulation 9
Income Tax Assessment Regulations 1997 Regulation 960-50.01
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Summary
You are not entitled to a deductible amount in accordance with Section 27H of the ITAA1936.
Deductible amount
Section 27H of the 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 annual deductible amount. The deductible amount is deemed to be a return of part of your contribution towards the purchase of the pension.
The deductible amount is calculated based on the UPP of your pension. The UPP is the amount you contributed towards the purchase price of your pension for which you did not claim, and were not eligible to claim, a tax deduction in Australia. Contributions made by an employer or by another person under an agreement to which the employer was a party, cannot form part of the UPP of the pension.
Subsection 27A(1) of the ITAA 1936 contains the definition of purchase price in relation to a superannuation pension. Subparagraph (a)(ii) of that former subsection stated that 'purchase price' means the total amount of contributions to a superannuation fund made to obtain superannuation benefits consisting of a pension and other benefits such as a lump sum.
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.