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Edited version of your written advice
Authorisation Number: 1012830910655
Date of advice: 16 July 2015
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
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).
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.
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),
D = is the relevant number.
By putting your information into the above formula, your annual deductible amount is CHF 440.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commenced on:
1 June 2014
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.
All the pension is payable to you.
The pension became payable on or after 1 July 1983
The pension is payable for life.
You provided information to assist the Commissioner calculate the total amount of personal contributions, paid to the retirement fund towards the purchase of the pension.
The residual capital value is nil.
Your pension is paid on a regular 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 Regulations 1936 Regulation 9
Other references:
Taxation Determination TD 2006/17
Taxation Determination TD 2006/54