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Edited version of your written advice
Authorisation Number: 1012830845228
Date of advice: 21 July 2015
Ruling
Subject: Undeducted Purchase Price (UPP) of your foreign pension.
Question
Are you entitled to a deductible amount in respect of the UPP of your foreign pension?
Answer
Yes, your annual deductible amount and part year deductible amount has been calculated in accordance with subsection 27H(2) of the Income Tax Assessment Act 1936 (ITAA1936).
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.
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 deductible amount is calculated using the following formula:
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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,
C = is the residual capital value (if any), which in your case is 0
D = is the relevant number,
Part year calculation
A pro-rated amount applies for the first year.
This ruling applies for the following periods:
2013-14 financial year
2014-15 financial year
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are resident of Australia for income tax purposes
Your pension is paid by a retirement fund established and managed outside Australia
You have provided evidence which shows you paid personal contributions.
Your pension commenced on 1 July 2010 and is payable for life
On your death 50% of the pension reverts to your spouse
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 and regulatory provisions:
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1936 Subsection 27H(2)
Income Tax Assessment Act 1936 Subsection 27H(4)