Superannuation: Undeducted Purchase Price (UPP) - Pension purchased by a roll-over of an ETP that is a commutation of an earlier pension which commenced to be payable prior to 1 July 1994

What is the undeducted purchase price (UPP) of an immediately payable pension (the 'new pension') which is wholly purchased by rolling-over an eligible termination payment (ETP) that is the commutation of an earlier pension when, (a) the earlier pension was itself wholly purchased by the roll-over of an ETP that was the commutation of an original pension, and (b) the original pension commenced to be payable prior to 1 July 1994?

The UPP of the new pension is the amount of the ETP used to purchase the new pension reduced by the sum of the taxed element of the post-June 83 component of the ETP and the untaxed element of the post-June 83 component of the ETP.

A superannuation fund currently pays a pension which satisfies the standards as set out in subregulation 1.06(2) of the Superannuation Industry (Supervision) Regulations (SISR).

The current pension was wholly purchased with a rolled-over ETP. The ETP resulted from the partial commutation of an allocated pension which commenced to be payable prior to 1 July 1994.

The member will commute the current pension, and roll-over the resulting ETP to wholly purchase a new pension which satisfies the standards as set out in subregulation 1.06(2) of the SISR.

Section 27AAAA of the Income Tax Assessment Act 1936 (ITAA 1936) applies to a pension if the pension is purchased exclusively with commutation ETPs that are wholly attributable to a pension or annuity that commenced before 1 July 1994. A commutation ETP can be attributed to a pension or annuity that commenced before 1 July 1994 through one or more roll-overs.

'Commutation ETP' is defined in subsection 27AAAA(2) of the ITAA 1936, and means an ETP arising from the commutation or residual capital value of a superannuation pension or annuity.

The 'undeducted purchase price' of the new pension is defined in subsection 27A(1) of the ITAA 1936. When section 27AAAA of the ITAA 1936 applies to a pension that has been wholly purchased by the roll-over of one or more ETPs, the undeducted purchase price of the pension is the amount of the ETPs used to purchase the pension reduced by the following components of the ETPs: (a) the taxed element of the post-June 83 component, and (b) the untaxed element of the post-June 83 component.