Undeducted purchase price of pensions
About Undeducted Purchase Price (UPP)
Australian pensions and annuities
Foreign pensions and annuities
About Undeducted Purchase Price (UPP)
The UPP is the amount you contributed towards the purchase price of your pension or annuity for which you were not eligible to claim a tax deduction. Each year a portion of the UPP can be used to reduce the pension or annuity income in your tax return. This is called the deductible amount.
Australian pensions and annuities
You may be entitled to a UPP deduction if you:
- received a superannuation pension and you could not claim for some or all of the personal contributions you made to your superannuation fund or retirement savings account provider in previous years
- received a pension or annuity that reverted to you on the death of another person, or
- bought your annuity or pension with your own capital.
Note:
Pensions from Centrelink and the Department of Veterans Affairs do not have a deductible amount.
Generally, your payer should be able to tell you what your deductible amount is. Alternatively, the Australian Taxation Office (ATO) can work it out for you.
You will need to provide the ATO with your name, address, and tax file number and answer a series of questions.
Usually, when you start to receive a pension, the pension provider will give you a copy of the details regarding your pension. In addition, each year your pension provider must give you a payment summary for the year, and most pension providers also supply additional information with the payment summary. You may find the answers to many of the following questions in that additional information.
Your name, address and tax file number.
- What is your date of birth?
- On what date did your pension or annuity first become payable? This is the first day of the first payment period of the pension or annuity. (Check your original contract or information sheet, or contact your pension provider if you are unsure.)
- What is the name of the provider or company paying your pension or annuity?
- If you are receiving a superannuation pension:
a. What amount did you personally contribute to your superannuation provider after 30 June 1983? Ask your superannuation provider
b. For what part of this amount did you not get a tax deduction?
c. Have you rolled over any capital gains tax exempt amounts to your superannuation provider? What is the amount?
- If you are receiving a superannuation pension from a provider which has not paid tax on the contributions it received—such as some government funds—or your superannuation pension commenced before 1 July 1994 what amounts did you contribute towards your superannuation before 1 July 1983 for which you were not entitled to claim a tax deduction or rebate? The Australian Taxation Office can provide this figure if you do not have it—ring the Superannuation Infoline on 13 10 20.
- If you are receiving an annuity or superannuation pension that you bought with one or more eligible termination payments (ETPs):
a. What amounts of each component of the ETP did you roll over into the annuity or superannuation pension? (Your pension or annuity provider can give you this information.)
Examples: undeducted contributions, capital gains tax exempt amounts, concessional components, invalidity components and pre-July 1983 or post-June 1983 components.
b. Did you buy the superannuation pension or annuity you are now receiving with funds obtained solely from rolling over a previous superannuation pension or annuity? If so, when did you first start to receive payments under the previous superannuation pension or annuity?
Note: This information is important if:
- you bought a pension or annuity on or after 1 July 1994 and
- the purchase price of the pension or annuity was derived wholly from funds obtained by rolling over a previous pension or annuity which had a starting date earlier than 1 July 1994.
- If you are receiving an annuity that you bought with money, other than as described in question 6, how much did you pay for the annuity?
- Is the period for which you will be receiving the pension or annuity fixed?
a. If YES, how long is the period?
b. If NO:
- What are the conditions under which the payments are made?
- Does your pension or annuity have a reversionary beneficiary—this is someone who will be entitled to receive all or part of your pension or annuity payments if you die? If so, what is the name and date of birth of this person?
- If you are receiving your pension or annuity because it reverted to you upon the death of someone else, what is the name, date of birth and tax file number of the person who died? On what date did the deceased person first receive the pension?
- If someone else is now entitled to a share of your pension or annuity, what is the percentage to which they are entitled?
- When the pension or annuity stops, will an agreed lump sum—often called the residual capital value—become payable? If so, how much is this lump sum?
If you have commuted (or partially commuted) your pension to a lump sum during the year, the answers to the above questions and the information in the ETP Payment Summary will be used to recalculate the deductible amount.
Foreign pensions or annuities
If your pension or annuity has a UPP and you showed income from a foreign pension or annuity on your tax return, you may be able to reduce the taxable amount of your pension or annuity.
Note:
Only some foreign pensions and annuities have a UPP.
That 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 a life expectancy factor that applies to you, according to life expectancy statistics.
Note:
If you received, or were entitled to receive, a tax deduction under Australian taxation law for any of your personal contributions, these amounts are not included in your UPP.
Use the following table to determine the deductible amounts of British pensions paid under the British National Insurance Scheme.
Pension category
|
Deductible amount
|
A
|
8% of the annual amount of the pension
|
B
|
8% of the annual amount of the pension
|
C
|
No deductible amount
|
D
|
No deductible amount
|
Pensions paid from the Sociale Verzekeringbank (SVB) under the Netherlands’ Social Insurance Scheme which attract 25% UPP are:
- old age
- widow's
- widower's, and
- orphan's.
The Italian authorities issue an 'Article 17' letter each year showing the amount the you contributed towards your pension. This amount can vary each year. If you do not know your deductible amount, you will need to attach photocopies (front and back) of the 'Article 17' letters for the 2000 and 2001 year to your tax return. The amount will be calculated for you.
Recipients of other overseas pensions may also be entitled to a UPP deduction and will need to contact the Superannuation Infoline on 13 10 20 to determine eligibility.
For other important information, go to:
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