Undeducted Purchase Price for pensions
 

(only read on if you are receiving a UK pension and are living in Oz!)

I have just received a Private Ruling from the ATO after enquiring about getting a UPP taxable income deduction.

The letter and notes were models of clarity (I can't believe I'm writing that about a tax letter!) I am henceforth able to deduct quite a sum from my taxable income: so for those of you who have been in doubt about this matter (as I was before I wrote to the ATO) - it's worth doing!

Re: Undeducted Purchase Price for pensions
 

Deduction from Tax_Assessable_Income = UPP / Life_expectancy_at_commencement_of_pension.

No tax on earnings on capital when in pension mode.

Re: Undeducted Purchase Price for pensions
 

Not exactly, but in my case near enough!

Re: Undeducted Purchase Price for pensions
 

Mind spelling it out - interested in the ruling.

Re: Undeducted Purchase Price for pensions
 

Basically it confirms what I had been told: that my own contributions from salary to my pension fund (company pension) were allowable as UPPs.

I got my pension fund to give me details of all my contributions, sent full details to the ATO with all my relevant details and they sent back the exact amount I can deduct from my taxable income every year. The formula, which is on the ATO website anyway, is

(Share of pension payable in the year of income) x (Contributions over the years minus the residual capital value)
__________________________________________________ ________________
Life expectancy of the older spouse at retirement

(It's a bit more complicated than that, but that's the basics)

The letter explained it all very well. The ruling will be published, de-identified, on their site in due course.

Re: Undeducted Purchase Price for pensions
 

Well done Rog. I too have letters with contributions. But surely, in general, you don't need the ATO to tell you what is allowed but make the deductions yourself and keep the paperwork if challenged or audited. Or is that not how it works?

Re: Undeducted Purchase Price for pensions
 

Ta. I'm still in accumulation phase and have a stack of company franking credits to work through. The dropping of the super surcharge opens up the possibility of making max super contributions, ~100k / yr @ 15% tax, and drawing salary to 63k @ marginal tax of 30% (same as company rate) and depositing excess over living expenses in undeducted contributions rather than leaving excess in the company and racking up more franking credits.

This might interest someone nearing retirement and not having withdrawn the full lump sum tax free amount:
Reduce tax on pensions (both complying and allocated)

Re: Undeducted Purchase Price for pensions
 

Hi Rog,

Just a quickie mate, how long did it take the ATO to process your application for your private ruling? They have had mine about 4 months now.

Andy

Re: Undeducted Purchase Price for pensions
 

I wrote to them on 5th May, and the ruling came back on the 29th. Not bad, IMO! I would check up on yours.......

Re: Undeducted Purchase Price for pensions
 

I think you are right but I heard so many disparate accounts of what was the situation I thought I'd get it from the horse's mouth. I didn't actually ASK for a ruling, just guidance, so it all turned out well.

That's the trouble with forums like this: people sometimes have completely the wrong idea but put it out as fact: it makes sense to investigatethe important things further.

Re: Undeducted Purchase Price for pensions
 

Alway found the Aus Tax Office helpful - but you must present all the relevant facts else garbage in, garbage out.