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Edited version of your written advice
Authorisation Number: 1012895552139
Date of advice: 22 October 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 for the 2014-15 financial year has been calculated in accordance with subsection 27H(3) 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.
In recognition of the difficulties Italian pensioners face in obtaining information relating to their contributions to the overseas social welfare, Taxation Ruling IT 2554 Income tax: Australia/Italy double taxation agreement: foreign 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 overseas social welfare 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.
This ruling applies for the following period:
Year ended 30 June 2015
The scheme commenced on:
The scheme has commenced
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 pension scheme established outside of Australia
You have provided evidence which shows you receive a pension contributions
Your pension commenced after 1 July 1983 and is payable for life
You currently receive 100% of the pension
Your pension is paid on a six 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 provisions
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1936 Subsection 27H(3)
Income Tax Assessment Act 1936 Subsection 27H(4)
ATO view documents:
Taxation Ruling IT 2554