| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012863978743
Date of advice: 21 August 2015
Ruling
Subject: Deductible amount of the undeducted purchase price of your foreign pension
Question
Are you entitled to a deductible amount in respect of your foreign pension?
Answer
Yes, your annual deductible amount has been calculated in accordance with the legislation.
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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By putting your information into the above formula, your annual deductible amount is obtained.
Relevant facts and circumstances
This ruling is based on the facts stated below. 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. Where there is no variation, the ruling can apply for more than just the period/s mentioned above.
You are resident of Australia for income tax purposes
Your pension is paid by a retirement fund established and managed outside Australia
You currently receive 100% of the pension
The residual capital value of the pension is nil.
You have provided a copy of your fund statement to assist the Commissioner in determining the amount of your personal contributions
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
Notice of private ruling
Question
Are you entitled to a deductible amount in respect of your foreign pension?
Answer
Yes, your annual deductible amount your annual deductible amount has been calculated in accordance with the legislation.
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.
In recognition of the difficulties Italian pensioners face in obtaining information relating to their contributions to the INPS, Taxation Ruling IT 2554 Income tax: Australia/Italy double taxation agreement: Italian pensions derived by Australian residents allows for the following alternative formula to be used to calculate the deductible amount.
(amount of contributive portion for XXXX and YYYY calendar years) |
X |
90% |
2 |
It must be noted that the contributive portion supplied on the Article 10 letters issued by INPS are based on calendar years. Therefore, to calculate the deductible amount for each Australian financial year, two years' statements are required. The contributive portion (reduced by 10% to reflect the interest element in that component of the pension) is the annual exclusion amount.
Relevant facts and circumstances
This ruling is based on the facts stated below. 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. Where there is no variation, the ruling can apply for more than just the period/s mentioned above.
You are resident of Australia for income tax purposes
You have provided a copy of your fund statement to assist the Commissioner in determining the amount of your personal contributions
Your pension is paid by a retirement fund established and managed outside Australia
You currently receive 100% of the pension
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 provisions
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1936 Subsection 27H(3)
Income Tax Assessment Act 1936 Subsection 27H(4)
Income Tax Regulations 1936 Regulation 9
ATO view documents:
Taxation Ruling IT 2554
Important information to note
The deductible amount can only be included in your tax return if you have declared your pension income. When including these amounts, they should be translated to Australian currency using the same exchange rate. More information about exchange rates is available from our website by entering 'QC 16583' in the search box on the top right of the page.