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Edited version of your written advice
Authorisation Number: 1012834207042
Date of advice: 6 July 2015
Ruling
Subject: UPP
Question
Are you entitled to a deductible amount in respect of your foreign pension?
Answer
Yes, your annual deductible amount for the 2012-13 financial year is X.
This ruling applies for the following periods:
30 June 2013
30 June 2014
The scheme commenced on:
1 November 2006
Relevant facts and circumstances
You are resident of Australia for income tax purposes
Your pension is paid by a foreign fund, a scheme maintained in a foreign country
You have provided a copy of your Calculation of Assessment Basis' statement from the fund to assist the Commissioner in determining the amount of your personal contributions
Your pension commenced on November 20AA and is payable for life
You currently receive 100% of the pension and on your death it reverts to your spouse
The total amount of your personal contributions is an amount in foreign currency - Y
The pension is reversionary
The residual capital value of the pension is nil.
When the pension commenced you were more than 60 and your spouse was less than 50.
When the pension commenced your life expectancy factor was more than 19.00 and your spouse's was more than 35.00
Your pension is paid on a monthly basis.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1936 Section 27H(1)(a)
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 - currency translation
Income Tax Regulations 1936 Regulation 9
Income Tax Assessment Regulations 1997 Regulation 960-50.01 - currency translation
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:
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 Y.
C = is the residual capital value (if any), which in your case is Z.
D = is the relevant number, which in your case is more than 35.
By putting your information into the above formula, your annual deductible amount is X.