| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012872109643
Date of advice: 7 September 2015
Ruling
Subject: Undeducted purchase price
Question
Are you entitled to a deductible amount in respect 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 (ITAA 1936).
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 = 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 period:
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commenced on:
The scheme has commenced
Relevant facts and circumstances
You are a resident of Australia for income tax purposes
Your pension is paid by a pension scheme established and managed outside Australia
You have provided evidence which shows you paid personal contributions
Your pension commenced on dd/mm/yyyy and is payable for the life
On your death, 66% of the pension reverts to your spouse
Your pension is paid on a monthly 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)
ATO view documents:
Taxation Ruling IT 2620
Taxation Ruling IT 2272