Edited version of Private Advice

Authorisation number: 5010104098439

Date of advice: 20 June 2024

Subject: Deductable purchase foreign persion

Ruling

Question

Are you entitled to an undeducted purchase price (UPP) deductible amount in respect of your foreign pension?

Answer:

Yes, your annual UPP deductible amount for the 20YY-YY income year is XXXX.

This ruling applies for the following period:

30 June 20YY

The scheme commences on:

1 July 20YY

Relevant facts and circumstances

You are a resident of Australia for income tax purposes.

You arrived in Australia on XXXX.

You were born on XXXX.

Your pension is a scheme maintained in XXXX.

You have provided a letter from the scheme.

Your pension commenced on XXXX

Your pension is paid monthly.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Former subsection 27A(1)

Income Tax Assessment Act 1936 section 27H

Income Tax Assessment Act 1936 subsection 27H(2)

Income Tax Assessment Act 1936 subsection 27H(3)

Income Tax Assessment Act 1936 subsection 27H(4)

Superannuation Industry (Supervision) Regulations 1994 Schedule 1B

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 UPP deductible amount.

The definition of purchase price is contained in subsection 27H(4) of the Income Tax Assessment Act 1936. It states that 'purchase price' includes the contributions made by a person to any foreign superannuation fund to obtain a pension and so much of contributions considered reasonable by the Commissioner as having been paid by a person to a foreign superannuation fund to obtain superannuation benefits including a pension.

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 UPP 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

C = is the residual capital value (if any)

D = is the relevant number

By putting your information into the above formula, your annual UPP deductible amount is XXXX.

Conclusion

Please note that the UPP deductible amount for the full financial year will remain the same provided the details relating to the UPP Determination remain unchanged.