Superannuation: Undeducted Purchase Price (UPP) - lifetime pension commenced before 1 July 1983

How is the annual deductible amount of the UPP calculated in relation to a lifetime superannuation pension paid from a complying superannuation fund where the pension commenced to be paid before 1 July 1983?

The annual deductible amount of the superannuation pension is ascertained in accordance with former section 26AA of the Income Tax Assessment Act 1936 (ITAA 1936).

The taxpayer receives a pension from a complying superannuation fund.

The pension is payable for life.

The pension became payable before 1 July 1983.

Former section 26AA of the ITAA 1936 allows the UPP of an annuity to be excluded from the assessable income of the taxpayer. A pension is an annuity for the purposes of the section.

Under former subsection 26AA(2)(a) for an annuity payable until the death of the taxpayer, or for a term that will not end before his death, the annual amount of the UPP to be excluded from the assessable income of the taxpayer is calculated by the formula: Undeducted Purchase Price / Life expectancy of taxpayer at the commencement of pension

For the purpose of subsection 26AA(2)(a), the life expectancy is ascertained with reference to the Australian Life Tables published by the Commonwealth Statistician, as prescribed by former regulation 4A of the Income Tax Regulations..

The UPP means the amount the recipient of the pension or annuity has outlaid to purchase the pension or annuity, for which no tax deduction or rebate was allowed or allowable. The deductible amount has been calculated in accordance with section 26AA ITAA 1936.