Income tax: undeducted purchase price of pensions from Austrian superannuation insurance funds

Article 18 of the Australia/Austria Double Tax Agreement (which appears at Schedule 27 of the International Tax Agreements Act 1953 ) provides for the taxation of pensions and annuities (other than government service pensions paid to former Austrian government employees) only in the recipient's country of residence. Therefore, social security (superannuation insurance) pensions received by Australian residents from Austrian superannuation insurance funds are not taxed in Austria but must be included in the recipient's assessable income for Australian taxation purposes under section 27H of the Income Tax Assessment Act 1936 ('ITAA 1936').

The taxable amount of these pensions can generally be reduced by the pension's undeducted purchase price, or UPP. Broadly, UPP comprises non-employer contributions made to purchase a pension which were not allowable as an Australian tax deduction and which, for contributions before 1 July 1983, did not give rise to a rebate of tax.

This Ruling explains: (a) how the Commissioner will exercise his discretion under subsection 27H(3) of the ITAA 1936 to determine the deductible amount of an Austrian social security pension (i.e., the amount by which the taxable amount of the pension is reduced each year); (b) the exact method, based on UPP, which can be used for calculating the deductible amount under subsection 27H(2) of the ITAA 1936; and (c) how to convert Austrian to Australian currency.

The Ruling applies to all Austrian social security pensions, other than government service pensions, which are based on a person's contributions (contributory pensions) and are paid under one of the three Austrian social insurance Acts 'ASVG', 'GSVG' or 'BSVG' (see paragraph 18 for further explanation). Specifically, it applies to age, premature age, invalid, disability, widowed person's and orphan's pensions paid by Austrian superannuation insurance funds under these Austrian social insurance Acts.

A glossary of some common terms which appear on Austrian superannuation insurance fund documentation is included in this Ruling.

The exact method for calculating UPP and the deductible amount of a contributory pension received from an Austrian superannuation insurance fund is outlined in paragraphs 8 to 10. However, due to the unavailability of actual contributions data, it is often not possible to establish the amount of actual contributions which form the 'purchase price' (as defined in subsection 27A(1) of the ITAA 1936) of such pensions. Where records of actual contributions are not available but the Austrian superannuation insurance fund has provided the pensioner with a list of the pensioner's insurance periods, the Commissioner will exercise his discretion under subsection 27H(3) of the ITAA 1936 and accept contribution figures calculated in accordance with the Tables set out under paragraph 41 as an appropriate estimate for the actual contributions made. (See paragraphs 19 to 37 for an explanation of how to use the Tables.) The calculated contribution figures will then form the basis for the pensioner's UPP which is used in the deductible amount formula set out in subsection 27H(2) of the ITAA 1936.

Where a pensioner is able to supply evidence of actual contributions for any year, those actual contributions should be included in the deductible amount calculation. Similarly, where a pensioner has evidence of actual monthly salary for any year, the contributions rates in Column A of each of the Tables can be applied to the actual salary amount to determine the actual contributions made for that month, subject to the maximum monthly threshold (see paragraph 10).

If a pensioner has evidence of actual contributions, the deductible amount of an Austrian contributory social security pension is calculated using the formula set out in subsection 27H(2), which, in most cases, will be: UPP / Relevant number * UPP is the undeducted purchase price of the pension calculated according to the method described in paragraph 9. * Relevant number is the pensioner's life expectation factor when the first pension payment commences to be payable (or, if the pensioner is married and the pension is first payable on or after 1 July 1983, the greater of the life expectancy of the pensioner and his or her spouse). The life expectation factor is determined in accordance with the Life Tables published by the Australian Government Actuary.

The UPP of an Austrian contributory social security pension consists of all contributions made by the pensioner (or, where relevant, the pensioner's spouse) which secured entitlement to the pension. However, contributions which do not form part of the UPP are: - contributions by an employer (subsection 27A(5C) of the ITAA 1936); - credited contributions (explained in paragraph 36); and - for pensions payable before 1 July 1983 (governed by former section 26AA of the ITAA 1936), contributions by a present or former spouse.

Where a pensioner does not have evidence of actual contributions but is able to provide evidence of actual monthly salaries, the pensioner can multiply those actual monthly salaries by the contributions rates set out in Column A of each of the Tables to calculate the actual contributions made during each month. However, where a pensioner's actual salary for any month exceeded the maximum monthly threshold amount in Column B, the pensioner should multiply the contribution rate in Column A by the maximum monthly threshold amount in Column B to calculate the actual contributions made for that particular month (see explanation at paragraph 37).

A widowed person's pension paid following the death of a spouse who was receiving an Austrian social security pension has the same deductible amount as that of the deceased person's pension provided the pension commenced to be payable to the deceased on or after 1 July 1983.

For taxation purposes, Austrian social security pensions must be converted into Australian currency. To determine the appropriate currency exchange rate to be used for converting Austrian currency into Australian currency, refer to section 20 of the ITAA 1936 and Taxation Ruling IT 2498. Pensions received in foreign currency should, strictly, be translated to Australian currency on the following basis: (a) if a pension is sent to Australia - at the exchange rate applicable when each pension instalment is received; or (b) if a pension is not sent to Australia - at the exchange rate applicable at the end of the year of income in which the pension is received (the relevant year of income).

However, recognising the difficulties that a strict application of the law may cause some pensioners, we will accept translation of pensions sent to Australia on the basis of the average annual exchange rate for the relevant year of income.

If the pension is translated to Australian dollars at the average annual exchange rate or at the exchange rate applicable at the end of the year of income: (a) the deductible amount of the UPP should be calculated in Austrian currency; (b) the gross amount of the pension in Austrian currency should be reduced by the deductible amount; and (c) the net amount should be translated to Australian dollars at the average annual exchange rate or at the end of year of income exchange rate, as the case may be.

For those years in which all or part of the pension is denominated in Euros, the deductible amount, and that part of the pension (if any) denominated in Austrian Schillings, should be converted to Euros at the official exchange rate of one Euro = 13.7603 Austrian Schillings.

This Ruling applies (subject to any limitations imposed by statute) to pensions commencing both before and after its date of issue. However, the Ruling does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of the Ruling (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

The Federal Ministry of Finance of Austria and the Main Association of Austrian Social Security Institutions have confirmed that it is not possible for Austrian superannuation insurance funds to provide figures for actual contributions in respect of each pensioner, as these records are, in many cases, not available. However, Austrian superannuation insurance funds are able to provide the pensioner with a copy of the Calculation of Assessment Basis statement which contains the actual monthly salary amounts used for calculating the pensioner's Austrian superannuation pension entitlement. Applicants for an Austrian superannuation pension automatically receive a Calculation of Assessment Basis statement with the notification of acceptance or rejection of the pension claim. Copies of the Calculation of Assessment Basis statement can be requested from the relevant Austrian superannuation insurance fund at any time.

The three Austrian social insurance Acts discussed in this Ruling are: • Allgemeines Sozialversicherungsgesetz (ASVG) - General Social Insurance Act which applies to salary and wage earners; • Gewerbliches Sozialversicherungsgesetz (GSVG) - Commercial Social Insurance Act which applies to self-employed persons; and • Bauern-Sozialversicherungsgesetz (BSVG) - Farmers Social Insurance Act which applies to farmers.

Under subsection 27H(3) of the ITAA 1936, the Commissioner has a discretion to substitute a deductible amount different from the amount calculated in accordance with the formula in subsection 27H(2). This substituted amount is calculated by the alternative method in this Ruling. The Commissioner will exercise his discretion if he considers the subsection 27H(2) amount is inappropriate having regard to the terms and conditions applying to the pension and to any other matters he considers to be relevant.

In this regard, we appreciate that it will be difficult for many recipients of Austrian social security pensions to calculate the exact amount of UPP because of the difficulties in obtaining all the necessary information. We accept that such Austrian contributory social security pensions have a deductible amount, and we will accept calculations using Tables 1 to 7 (at paragraph 41 of this ruling), as necessary, to be an appropriate estimate of that amount. However, any period identified by the Austrian superannuation insurance fund as a period in which contributions were credited although not actually paid (for instance, periods of maternity leave etc.) should be excluded from the calculation (these contributions are explained in paragraph 36).

Under the Austrian social security system, different contribution rates are payable by different categories of employees. Tables 1, 3 and 5 set out contribution figures for compulsory contributions (denoted by a 'P' on Austrian pension documentation) under the ASVG (salary and wage earners), GSVG (self-employed persons) and BSVG (farmers) respectively. Tables 2, 4 and 6 set out contribution figures for voluntary contributions (denoted by an 'F' on Austrian pension documentation) under the ASVG, GSVG and BSVG respectively. Table 7 sets out contribution figures for all contributions made to any fund under the Austrian social security system prior to 1953.

Austrian superannuation insurance funds provide the pensioner with a copy of the Calculation of the Assessment Basis statement concurrently with notification of the grant of a pension. The statement includes three sections which are relevant to the UPP calculation - Beitragsgrundlagen (which lists the pensioner's average actual monthly salary figures which were used in the pension entitlement calculation), Zeitenaufgliederung (which lists the pensioner's total periods of contributions and the types of superannuation insurance periods) and Anzahl der nachgewiesenen Versicherungsmonate (which lists the total number of months of compulsory, voluntary and equivalent contributions made under the ASVG, GSVG and BSVG).

The Beitragsgrundlagen section includes a number of columns. The relevant columns for the purposes of the UPP calculation are: Jahr (Year), Art (with 'P' denoting compulsory insurance and 'F' denoting voluntary insurance), Monate ges./o.B (which lists the number of best months i.e., the months with the highest average salaries) and Monatl.Ges.BG (which lists the average actual salary per month). The remaining columns should be disregarded as they relate to the revaluation of the actual monthly salary figures for the purposes of calculating the pension entitlement. Only the actual monthly figures can be used in the calculation of the UPP.

Pensioners can multiply their average actual monthly salary amounts (shown in the Monatl.Ges.BG column) by the contribution rates set out in Column A of Tables 1 to 7 to determine their actual contributions for the periods shown in the Jahr (year) column, subject to the maximum monthly threshold (this threshold is explained at paragraph 37). To establish the type of contributions made and whether the contributions were made under the ASVG, GSVG or BSVG, it is necessary to refer to the Zeitenaufgliederung and Anzahl der nachgewiesenen Versicherungsmonate sections of the statement (see explanation in paragraphs 27 to 29).

If, separate to the Calculation of the Assessment Basis statement, a pensioner has other evidence of actual monthly salary for any period, the contributions rates in Column A of Tables 1 to 7 should be applied to that actual salary amount to determine the actual contributions made during that period, subject to the maximum monthly threshold (explained in paragraph 37). It is anticipated that details of monthly contribution rates for periods after 31 December 2000 will be released by the Commissioner via regular addendums to this Ruling as the rates become available.

Austrian superannuation insurance funds do not generally have records of contributors' actual contributions or actual monthly salaries for all years. However, national average monthly salary figures are available for 1953 and later years, and these figures are listed in Column C of Tables 1 to 6. By multiplying these average monthly salary figures by the contribution rates for each period, we have calculated average monthly contribution figures which are listed in Column D of Tables 1 to 6. For those periods which the Austrian institutions confirm that a pensioner was contributing to the Austrian institutions, but no figures relating to actual contributions or actual salary are available, the Commissioner will exercise his discretion under subsection 27H(3) to substitute the average contribution figures in Column D of Tables 1 to 6 for actual contributions.

The Zeitenaufgliederung section of the Calculation of the Assessment Basis statement lists the pensioner's total period of contributions and the types of superannuation insurance periods. The relevant columns for the purposes of the UPP calculation are: Von (start of period), Bis (end of period), Monate (total months in period), Art der Versicherungszeit (type of insurance period) and Tech.Bez (with 'P' denoting compulsory insurance, 'E' denoting equivalent insurance (where contributions were credited but not actually paid), and 'F' denoting voluntary insurance). In the Tech.Bez column, periods of compulsory insurance may alternatively be denoted as 'AP', 'GP' or 'BP', representing payments made under the ASVG, GSVG and BSVG respectively. Similarly, periods of equivalent insurance may be denoted as 'AE', 'GE' or 'BE', and periods of voluntary insurance may be denoted as 'AF', 'GF' or 'BF'.

Pensioners can use the figures which appear in column D of Tables 1 to 6, as appropriate, for those periods in which either compulsory or voluntary contributions were made. However, those periods for which no contributions were actually paid, such as periods of maternity leave etc (see discussion at paragraph 36 below) will need to be excluded from the UPP calculation. Such periods are denoted with an 'E' in the Tech.Bez column of the Zeitenaufgliederung section, and appear as 'Monate einer Ersatzzeit' in the Anzahl der nachgewiesenen Versicherungsmonate section of the Calculation of the Assessment Basis statement.

Periods for which actual average monthly salaries are known that are listed in the Beitragsgrundlagen section are also included in the contributions history listed in the Zeitenaufgliederung section of the Calculation of the Assessment Basis statement. As explained in paragraphs 21 to 23 above, those periods for which actual average monthly salaries are known (being those listed in the Beitragsgrundlagen section) should be multiplied by the Column A rate to calculate the actual contributions. When using the periods listed in the Zeitenaufgliederung section, care should be taken to ensure that the periods listed in the Beitragsgrundlagen section are not included in the UPP calculation twice.

To assist pensioners and tax practitioners to use the Calculation of the Assessment Basis statement, a glossary of Austrian terms which appear on the statement is included in this Ruling at paragraph 40.

The Federal Ministry of Finance of Austria and the Main Association of Austrian Social Security Institutions have not been able to supply Austrian national average monthly salary figures for years prior to 1953. In recognition of the compulsory contributions which would have been made, the Commissioner has calculated estimates of the average monthly earnings (and, therefore, estimates of the average monthly contributions). In the absence of average monthly earnings data, the Commissioner has calculated the estimates using the same ratio of average monthly earnings to the maximum monthly threshold which applied in the 1953 year. As the average monthly earnings figure (being Sch1,156) is approximately 65% of the maximum annual threshold figure (being Sch1,800), the estimates for average annual earnings for the 1942 to 1952 years represent 65% of the maximum monthly threshold amount for each year.

Therefore, for those periods from 1 July 1942 to 31 December 1952 which the Austrian institutions confirm that a pensioner was employed or contributing to the Austrian institutions, the Commissioner will exercise his discretion under subsection 27H(3) to substitute the estimated average contribution figures in Column D of Table 7 for actual contributions. For the period 1 January 1939 to 30 June 1942, only the monthly contribution rate of 5% is known. In the absence of either maximum monthly threshold or average monthly salary figures, for the period 1 January 1939 to 30 June 1942, the Commissioner will accept the same estimated average contribution figures which have been calculated for the period 1 July 1942 to 31 December 1942 (see first row of Table 7).

If, however, the pensioner is able to provide evidence of the pensioner's monthly salaries earned prior to 1953, the pensioner should multiply those actual monthly salaries by the contributions rates set out in Column A of Table 7 to calculate the actual contributions made during each period for which the actual salary is known, subject to the maximum annual threshold (this threshold is explained at paragraph 37).

Where the Commissioner does not exercise his discretion under subsection 27H(3) of the ITAA 1936, the deductible amount of a pension is determined under subsection 27H(2) if it was first payable on or after 1 July 1983; or former section 26AA if payable before 1 July 1983. Essentially, it is the UPP of a pension distributed over the expected term of the pension.

Contributions which secure entitlement to a pension form part of its purchase price. As contributions which secure entitlement to the pension are not tax deductible or rebatable in Australia, they form its undeducted purchase price, or UPP.

Both compulsory contributions and voluntary contributions form part of the purchase price of the pension. However, contributions which are not actually paid but are merely credited are not part of the purchase price of a pension. Periods of credited contributions are known as 'Zeiten ohne Beitragsentrichtung' (i.e., periods without deducted contributions) and examples include periods related to the birth and rearing of a child, and time spent in military or war service. The Austrian superannuation insurance funds distinguish between the periods of such contributions by referring to all months in which contributions accrued as 'insurance months', those months in which contributions were actually paid as 'contribution months' and those months in which contributions were merely created as 'equivalent months'. On the Calculation of the Assessment Basis statement, periods in which contributions were not actually paid but were merely credited are denoted by 'E' and are described in the Anzahl der nachgewiesenen Versicherungsmonate section as 'Monate einer Ersatzzeit' (i.e., equivalent months).

Under the Austrian social security scheme, there is a ceiling imposed on the maximum total contributions payable each year. The ceiling amount (i.e., maximum monthly threshold amount) for each month is set out in Column B of Tables 1 to 7. Therefore, where a pensioner's salary for any month exceeded the maximum monthly threshold amount in Column B, the pensioner should multiply the contribution rate in Column A by the maximum monthly threshold amount in Column B to calculate the actual contributions made for that particular month.

For the purposes of this Ruling, we consider that Austrian social security pensions paid to married people are reversionary (because a widowed person's pension may be paid to the surviving spouse). Therefore, for pensions first payable on or after 1 July 1983, the greater of the life expectancy of the pensioner and the pensioner's spouse is taken into account in determining the relevant number. Pensions payable before 1 July 1983 are governed by former section 26AA which provides that only the pensioner's life expectancy is to be taken into account.

The widowed person's pension payable is based on the deceased spouse's pension, which was, in turn, dependent on the deceased spouse's contributions record. As we consider the widowed person's pension to be a reversion of the deceased spouse's pension, the deductible amount of the deceased's pension will carry over to the widowed person's pension provided the pension commenced to be payable to the deceased on or after 1 July 1983.

Terms which commonly appear on the Calculation of Assessment Basis statement have the following meanings. Anzahl der nachgewiesenen Versicherungsmonate: number of verified months insured Art der Versicherungszeit: type of insurance period Beitragsgrundlagen: contribution basis Bemessungsgrundlagen: assessment basis Ersatzzeit für Arbeitslosengeldbezug: equivalent period - unemployment Ersatzzeit für Krankengeldbezug: equivalent period - health insurance benefit Ersatzzeit für Wochengeldbezug: equivalent period - maternity Ersatzzeit, Zeiten der Kindererziehung: equivalent period - child care/children's education Keine Versicherung: no insurance period credited Kriegsdienstleistung, Gefangenschaft, u.a. - Ersatzzeit: military service, prisoner of war, and similar events - equivalent period Monate einer Ersatzzeit: equivalent (credited) contribution months Monate der Pflichtversicherung: compulsory insurance months Pflichtversicherung als Angestellter: compulsory insurance under ASVG ('white collar' worker) Pflichtversicherung als Arbeiter: compulsory insurance under ASVG ('blue collar' worker) Pflichtversicherung als Lehrling: compulsory insurance (apprentice) Pflichtversicherung als Selbständige(r) nach dem GSVG: compulsory insurance under GSVG (self-employed person - commerce, industry, professions) Pflichtversicherung als Selbständige(r) nach dem BSVG: compulsory insurance under BSVG (self-employed person - farming) Versicherungsmonate: insurance months Zeitenaufgliederung: time on member level

The tables referred to in this Ruling are set out below. Table 1 - 1953 to 2000 ASVG (salary and wage earners) Compulsory Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) Austrian Sch (B) Austrian Sch (C) Austrian Sch (D)= (A) x (C) Austrian Sch 1/1/1953 to 31/12/1953 5.00% 1,800 1,156 58 1/1/1954 to 31/12/1954 5.00% 2,133 1,338 67 1/1/1955 to 31/7/1955 5.00% 2,600 1,409 71 1/8/1955 to 31/12/1955 6.00% 2,600 1,409 85 1/1/1956 to 31/12/1956 6.00% 3,900 1,499 90 1/1/1957 to 31/12/1957 6.00% 3,900 1,597 96 1/1/1958 to 31/12/1958 6.00% 3,900 1,644 99 1/1/1959 to 31/12/1959 6.00% 3,900 1,673 101 1/1/1960 to 31/12/1960 6.00% 3,900 1,772 107 1/1/1961 to 31/12/1961 6.50% 5,200 1,839 120 1/1/1962 to 31/12/1962 7.00% 5,200 2,154 151 1/1/1963 to 30/4/1963 7.00% 5,200 2,295 161 1/5/1963 to 31/12/1963 7.25% 5,200 2,295 167 1/1/1964 to 31/12/1964 7.50% 5,200 2,507 189 1/1/1965 to 30/4/1965 7.50% 6,300 3,063 230 1/5/1965 to 31/12/1965 8.00% 6,300 3,063 246 1/1/1966 to 31/12/1966 8.00% 6,825 3,294 264 1/1/1967 to 31/12/1967 8.25% 7,350 3,548 293 1/1/1968 to 30/6/1968 8.25% 7,875 3,712 307 1/7/1968 to 31/12/1968 8.50% 7,875 3,712 316 1/1/1969 to 31/12/1969 8.50% 8,400 4,147 353 1/1/1970 to 30/6/1970 8.50% 8,925 4,498 383 1/7/1970 to 31/12/1970 8.75% 8,925 4,498 394 1/1/1971 to 31/12/1971 8.75% 9,450 5,026 440 1/1/1972 to 31/12/1972 8.75% 10,150 5,588 489 1/1/1973 to 31/12/1973 8.75% 11,025 6,236 546 1/1/1974 to 31/12/1974 8.75% 12,250 7,192 630 1/1/1975 to 31/12/1975 8.75% 13,650 7,998 700 1/1/1976 to 31/12/1976 8.75% 15,400 8,671 759 1/1/1977 to 31/12/1977 8.75% 17,500 9,275 812 1/1/1978 to 31/12/1978 9.25% 19,600 9,840 911 1/1/1979 to 31/12/1979 9.25% 21,700 10,421 964 1/1/1980 to 31/12/1980 9.75% 22,750 11,178 1,090 1/1/1981 to 31/12/1981 9.75% 23,800 11,984 1,169 1/1/1982 to 31/12/1982 9.75% 25,200 12,669 1,236 1/1/1983 to 31/12/1983 9.75% 26,600 12,966 1,265 1/1/1984 to 31/12/1984 9.75% 28,000 13,635 1,330 1/1/1985 to 31/12/1985 10.25% 28,700 14,462 1,483 1/1/1986 to 31/12/1986 10.25% 30,100 15,234 1,562 1/1/1987 to 31/12/1987 10.25% 30,800 15,991 1,640 1/1/1988 to 31/12/1988 10.25% 32,200 16,372 1,679 1/1/1989 to 31/12/1989 10.25% 32,900 16,995 1,742 1/1/1990 to 31/12/1990 10.25% 33,600 17,886 1,834 1/1/1991 to 31/12/1991 10.25% 35,000 19,044 1,953 1/1/1992 to 31/12/1992 10.25% 37,100 20,133 2,064 1/1/1993 to 31/12/1993 10.25% 39,200 21,118 2,165 1/1/1994 to 31/12/1994 10.25% 42,000 21,843 2,239 1/1/1995 to 31/12/1995 10.25% 44,100 22,670 2,324 1/1/1996 to 31/12/1996 10.25% 45,500 23,260 2,385 1/1/1997 to 31/12/1997 10.25% 47,600 TBA TBA 1/1/1998 to 31/12/1998 10.25% 49,000 TBA TBA 1/1/1999 to 31/12/1999 10.25% 49,700 TBA TBA 1/1/2000 to 31/12/2000 10.25% TBA TBA TBA Table 2 - 1953 to 2000 ASVG (salary and wage earners) Voluntary Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) Austrian Sch (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1953 to 31/12/1953 10.00% 2,100 1,156 116 1/1/1954 to 31/12/1954 10.00% 2,489 1,338 134 1/1/1955 to 31/7/1955 10.00% 3,034 1,409 141 1/8/1955 to 31/12/1955 12.00% 3,034 1,409 170 1/1/1956 to 31/12/1956 12.00% 4,550 1,499 180 1/1/1957 to 31/12/1957 12.00% 4,550 1,597 192 1/1/1958 to 31/12/1958 12.00% 4,550 1,644 198 1/1/1959 to 31/12/1959 12.00% 4,550 1,673 201 1/1/1960 to 31/12/1960 12.00% 4,550 1,772 213 1/1/1961 to 31/12/1961 13.00% 6,067 1,839 240 1/1/1962 to 31/12/1962 14.00% 6,067 2,154 302 1/1/1963 to 30/4/1963 14.00% 6,067 2,295 322 1/5/1963 to 31/12/1963 14.50% 6,067 2,295 333 1/1/1964 to 31/12/1964 15.00% 6,067 2,507 377 1/1/1965 to 30/4/1965 15.00% 7,350 3,063 460 1/5/1965 to 31/12/1965 16.00% 7,350 3,063 491 1/1/1966 to 31/12/1966 16.00% 7,963 3,294 528 1/1/1967 to 31/12/1967 16.50% 8,575 3,548 586 1/1/1968 to 30/6/1968 16.50% 9,188 3,712 613 1/7/1968 to 31/12/1968 17.00% 9,188 3,712 632 1/1/1969 to 31/12/1969 17.00% 9,800 4,147 705 1/1/1970 to 30/6/1970 17.00% 10,413 4,498 765 1/7/1970 to 31/12/1970 17.50% 10,413 4,498 788 1/1/1971 to 31/12/1971 17.50% 11,025 5,026 880 1/1/1972 to 31/12/1972 17.50% 11,842 5,588 978 1/1/1973 to 31/12/1973 17.50% 12,863 6,236 1,092 1/1/1974 to 31/12/1974 17.50% 14,292 7,192 1,259 1/1/1975 to 31/12/1975 17.50% 15,925 7,998 1,400 1/1/1976 to 31/12/1976 17.50% 17,967 8,671 1,518 1/1/1977 to 31/12/1977 17.50% 20,417 9,275 1,624 1/1/1978 to 31/12/1978 18.50% 22,867 9,840 1,821 1/1/1979 to 31/12/1979 18.50% 25,317 10,421 1,928 1/1/1980 to 31/12/1980 19.50% 26,542 11,178 2,180 1/1/1981 to 31/12/1981 19.50% 27,767 11,984 2,337 1/1/1982 to 31/12/1982 19.50% 29,400 12,669 2,471 1/1/1983 to 31/12/1983 19.50% 31,034 12,966 2,529 1/1/1984 to 31/12/1984 19.50% 32,667 13,635 2,659 1/1/1985 to 31/12/1985 20.00% 33,484 14,462 2,893 1/1/1986 to 31/12/1986 20.00% 35,117 15,234 3,047 1/1/1987 to 31/12/1987 20.00% 35,934 15,991 3,199 1/1/1988 to 31/12/1988 20.00% 37,567 16,372 3,275 1/1/1989 to 31/12/1989 20.00% 38,384 16,995 3,399 1/1/1990 to 31/12/1990 20.00% 39,200 17,886 3,578 1/1/1991 to 31/12/1991 20.00% 40,834 19,044 3,809 1/1/1992 to 31/12/1992 22.80% 43,284 20,133 4,591 1/1/1993 to 31/12/1993 22.80% 45,734 21,118 4,815 1/1/1994 to 31/12/1994 22.80% 49,000 21,843 4,981 1/1/1995 to 31/12/1995 22.80% 51,450 22,670 5,169 1/1/1996 to 31/12/1996 22.80% 53,084 23,260 5,304 1/1/1997 to 31/12/1997 22.80% 55,534 TBA TBA 1/1/1998 to 31/12/1998 22.80% 57,167 TBA TBA 1/1/1999 to 31/12/1999 22.80% 57,984 TBA TBA 1/1/2000 to 31/12/2000 22.80% TBA TBA TBA Table 3 - 1958 to 2000 GSVG (self-employed person) Compulsory Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1958 to 31/12/1958 6.00% 3,900 1,644 99 1/1/1959 to 31/12/1959 6.00% 3,900 1,673 101 1/1/1960 to 31/12/1960 6.00% 3,900 1,772 107 1/1/1961 to 31/12/1961 6.00% 5,200 1,839 111 1/1/1962 to 31/12/1962 6.00% 5,200 2,154 130 1/1/1963 to 30/6/1963 6.00% 5,200 2,295 138 1/7/1963 to 31/12/1963 7.00% 5,200 2,295 161 1/1/1964 to 31/12/1964 7.50% 5,200 2,507 189 1/1/1965 to 30/4/1965 7.50% 6,300 3,063 230 1/5/1965 to 31/12/1965 8.00% 6,300 3,063 246 1/1/1966 to 31/12/1966 8.00% 6,825 3,294 264 1/1/1967 to 31/12/1967 8.25% 7,350 3,548 293 1/1/1968 to 30/6/1968 8.25% 7,875 3,712 307 1/7/1968 to 31/12/1968 8.50% 7,875 3,712 316 1/1/1969 to 31/12/1969 8.50% 8,400 4,147 353 1/1/1970 to 30/6/1970 8.50% 8,925 4,498 383 1/7/1970 to 31/12/1970 8.75% 8,925 4,498 394 1/1/1971 to 31/12/1971 8.75% 9,450 5,026 440 1/1/1972 to 31/12/1972 8.75% 10,150 5,588 489 1/1/1973 to 31/12/1973 8.75% 11,025 6,236 546 1/1/1974 to 30/6/1974 8.75% 12,250 7,192 630 1/7/1974 to 31/12/1974 9.00% 12,250 7,192 648 1/1/1975 to 31/12/1975 9.00% 13,650 7,998 720 1/1/1976 to 31/12/1976 9.50% 15,400 8,671 824 1/1/1977 to 31/12/1977 9.50% 17,500 9,275 882 1/1/1978 to 31/12/1978 10.50% 19,600 9,840 1,034 1/1/1979 to 31/12/1979 10.50% 21,700 10,421 1,095 1/1/1980 to 31/12/1980 11.00% 22,750 11,178 1,230 1/1/1981 to 31/12/1981 11.00% 23,800 11,984 1,319 1/1/1982 to 31/12/1982 11.00% 25,200 12,669 1,394 1/1/1983 to 31/12/1983 11.00% 26,600 12,966 1,427 1/1/1984 to 31/12/1984 12.00% 28,000 13,635 1,637 1/1/1985 to 31/12/1985 13.00% 28,700 14,462 1,881 1/1/1986 to 31/12/1986 13.00% 30,100 15,234 1,981 1/1/1987 to 31/12/1987 12.50% 30,800 15,991 1,999 1/1/1988 to 31/12/1988 12.50% 32,200 16,372 2,047 1/1/1989 to 31/12/1989 12.50% 32,900 16,995 2,125 1/1/1990 to 31/12/1990 12.50% 33,600 17,886 2,236 1/1/1991 to 31/12/1991 12.50% 35,000 19,044 2,381 1/1/1992 to 31/12/1992 12.50% 37,100 20,133 2,517 1/1/1993 to 31/12/1993 12.50% 39,200 21,118 2,640 1/1/1994 to 31/12/1994 12.50% 42,000 21,843 2,731 1/1/1995 to 31/12/1995 12.50% 44,100 22,670 2,834 1/1/1996 to 31/3/1996 12.50% 45,500 23,260 2,908 1/4/1996 to 31/12/1996 13.50% 45,500 23,260 3,141 1/1/1997 to 31/12/1997 14.50% 47,600 TBA TBA 1/1/1998 to 31/12/1998 14.50% 49,000 TBA TBA 1/1/1999 to 31/12/1999 14.50% 49,700 TBA TBA 1/1/2000 to 31/12/2000 14.50% TBA TBA TBA Table 4 - 1958 to 2000 GSVG (self-employed person) Voluntary Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1958 to 31/12/1958 12.00% 4,550 1,644 198 1/1/1959 to 31/12/1959 12.00% 4,550 1,673 201 1/1/1960 to 31/12/1960 12.00% 4,550 1,772 213 1/1/1961 to 31/12/1961 12.00% 6,067 1,839 221 1/1/1962 to 31/12/1962 12.00% 6,067 2,154 259 1/1/1963 to 30/6/1963 12.00% 6,067 2,295 276 1/7/1963 to 31/12/1963 14.00% 6,067 2,295 322 1/1/1964 to 31/12/1964 15.00% 6,067 2,507 377 1/1/1965 to 30/4/1965 15.00% 7,350 3,063 460 1/5/1965 to 31/12/1965 16.00% 7,350 3,063 491 1/1/1966 to 31/12/1966 16.00% 7,963 3,294 528 1/1/1967 to 31/12/1967 16.50% 8,575 3,548 586 1/1/1968 to 30/6/1968 16.50% 9,188 3,712 613 1/7/1968 to 31/12/1968 17.00% 9,188 3,712 632 1/1/1969 to 31/12/1969 17.00% 9,800 4,147 705 1/1/1970 to 30/6/1970 17.00% 10,413 4,498 765 1/7/1970 to 31/12/1970 17.50% 10,413 4,498 788 1/1/1971 to 31/12/1971 17.50% 11,025 5,026 880 1/1/1972 to 31/12/1972 17.50% 11,842 5,588 978 1/1/1973 to 31/12/1973 17.50% 12,863 6,236 1,092 1/1/1974 to 30/6/1974 17.50% 14,292 7,192 1,259 1/7/1974 to 31/12/1974 18.00% 14,292 7,192 1,295 1/1/1975 to 31/12/1975 18.00% 15,925 7,998 1,440 1/1/1976 to 31/12/1976 19.00% 17,967 8,671 1,648 1/1/1977 to 31/12/1977 19.00% 20,417 9,275 1,763 1/1/1978 to 31/12/1978 21.00% 22,867 9,840 2,067 1/1/1979 to 31/12/1979 21.00% 25,317 10,421 2,189 1/1/1980 to 31/12/1980 22.00% 26,542 11,178 2,460 1/1/1981 to 31/12/1981 22.00% 27,767 11,984 2,637 1/1/1982 to 31/12/1982 22.00% 29,400 12,669 2,788 1/1/1983 to 31/12/1983 22.00% 31,034 12,966 2,853 1/1/1984 to 31/12/1984 24.00% 32,667 13,635 3,273 1/1/1985 to 31/12/1985 24.00% 33,484 14,462 3,471 1/1/1986 to 31/12/1986 24.00% 35,117 15,234 3,657 1/1/1987 to 31/12/1987 24.00% 35,934 15,991 3,838 1/1/1988 to 31/12/1988 24.00% 37,567 16,372 3,930 1/1/1989 to 31/12/1989 24.00% 38,384 16,995 4,079 1/1/1990 to 31/12/1990 24.00% 39,200 17,886 4,293 1/1/1991 to 31/12/1991 24.00% 40,834 19,044 4,571 1/1/1992 to 31/12/1992 22.80% 43,284 20,133 4,591 1/1/1993 to 31/12/1993 22.80% 45,734 21,118 4,815 1/1/1994 to 31/12/1994 22.80% 49,000 21,843 4,981 1/1/1995 to 31/12/1995 22.80% 51,450 22,670 5,169 1/1/1996 to 31/12/1996 22.80% 53,084 23,260 5,304 1/1/1997 to 31/12/1997 22.80% 55,534 TBA TBA 1/1/1998 to 31/12/1998 22.80% 57,167 TBA TBA 1/1/1999 to 31/12/1999 22.80% 57,984 TBA TBA 1/1/2000 to 31/12/2000 22.80% TBA TBA TBA Table 5 - 1978 to 2001 BSVG (farmers) Compulsory Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1978 to 31/12/1978 10.00% 19,600 9,840 984 1/1/1979 to 31/12/1979 10.25% 21,700 10,421 1,069 1/1/1980 to 31/12/1980 10.75% 22,750 11,178 1,202 1/1/1981 to 31/12/1981 10.75% 23,800 11,984 1,289 1/1/1982 to 31/12/1982 10.75% 25,200 12,669 1,362 1/1/1983 to 31/12/1983 11.00% 26,600 12,966 1,427 1/1/1984 to 31/12/1984 12.00% 28,000 13,635 1,637 1/1/1985 to 31/12/1985 12.50% 28,700 14,462 1,808 1/1/1986 to 31/12/1986 12.50% 30,100 15,234 1,905 1/1/1987 to 31/12/1987 12.50% 30,800 15,991 1,999 1/1/1988 to 31/12/1988 12.50% 32,200 16,372 2,047 1/1/1989 to 31/12/1989 12.50% 32,900 16,995 2,125 1/1/1990 to 31/12/1990 12.50% 33,600 17,886 2,236 1/1/1991 to 31/12/1991 12.50% 35,000 19,044 2,381 1/1/1992 to 31/12/1992 12.50% 37,100 20,133 2,517 1/1/1993 to 31/12/1993 12.50% 39,200 21,118 2,640 1/1/1994 to 31/12/1994 12.50% 42,000 21,843 2,731 1/1/1995 to 31/12/1995 12.50% 44,100 22,670 2,834 1/1/1996 to 31/3/1996 12.50% 45,500 23,260 2,908 1/4/1996 to 31/12/1996 13.50% 45,500 23,260 3,141 1/1/1997 to 31/12/1997 13.50% 47,600 TBA TBA 1/1/1998 to 31/12/1998 14.00% 49,000 TBA TBA 1/1/1999 to 31/12/1999 14.00% 49,700 TBA TBA 1/1/2000 to 31/12/2000 14.00% TBA TBA TBA 1/1/2001 to 31/12/2001 14.50% TBA TBA TBA Table 6 - 1978 to 2001 BSVG (farmers) Voluntary Contributions Period Contribution Rate Maximum Monthly Threshold Average Monthly Earnings Average Monthly Contribution (Column) (A) (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1978 to 31/12/1978 20.00% 22,867 9,840 1,968 1/1/1979 to 31/12/1979 20.50% 25,317 10,421 2,137 1/1/1980 to 31/12/1980 21.50% 26,542 11,178 2,404 1/1/1981 to 31/12/1981 21.50% 27,767 11,984 2,577 1/1/1982 to 31/12/1982 21.50% 29,400 12,669 2,724 1/1/1983 to 31/12/1983 22.00% 31,034 12,966 2,853 1/1/1984 to 31/12/1984 24.00% 32,667 13,635 3,273 1/1/1985 to 31/12/1985 24.00% 33,484 14,462 3,471 1/1/1986 to 31/12/1986 24.00% 35,117 15,234 3,657 1/1/1987 to 31/12/1987 24.00% 35,934 15,991 3,838 1/1/1988 to 31/12/1988 24.00% 37,567 16,372 3,930 1/1/1989 to 31/12/1989 24.00% 38,384 16,995 4,079 1/1/1990 to 31/12/1990 24.00% 39,200 17,886 4,293 1/1/1991 to 31/12/1991 24.00% 40,834 19,044 4,571 1/1/1992 to 31/12/1992 22.80% 43,284 20,133 4,591 1/1/1993 to 31/12/1993 22.80% 45,734 21,118 4,815 1/1/1994 to 31/12/1994 22.80% 49,000 21,843 4,981 1/1/1995 to 31/12/1995 22.80% 51,450 22,670 5,169 1/1/1996 to 31/12/1996 22.80% 53,084 23,260 5,304 1/1/1997 to 31/12/1997 22.80% 55,534 TBA TBA 1/1/1998 to 31/12/1998 22.80% 57,167 TBA TBA 1/1/1999 to 31/12/1999 22.80% 57,984 TBA TBA 1/1/2000 to 31/12/2000 22.80% TBA TBA TBA 1/1/2001 to 31/12/2001 22.80% TBA TBA TBA Table 7 - Contributions prior to 1953 All Contributions Period Contribution Rate Maximum Monthly Threshold Estimated Average Monthly Earnings Estimated Average Monthly Contribution (Column) (A) (B) Austrian Sch (C) Austrian Sch (D) = (A) x (C) Austrian Sch 1/1/1939 to 30/6/1942 5.00% 300 98 5 July 1942 to Dec 1942 5.00% 300 98 5 1943 5.00% 300 195 10 1944 5.00% 300 195 10 1945 5.00% 300 195 10 1946 5.00% 300 195 10 1947 5.00% 575 374 19 1948 5.00% 758 493 25 1949 5.00% 938 609 31 1950 5.00% 1,163 756 38 1951 5.00% 1,625 1,057 53 1952 5.00% 1,800 1,170 59

The following example illustrates the method used for calculating the UPP and deductible amount of an age pension received under the Austrian social insurance scheme.

Claudia retires on 1 August 1993, aged 65, and begins receiving an Austrian age pension on that date. At the time the pension commences, Claudia's spouse is aged 68. The Austrian superannuation insurance fund has provided Claudia with a copy of the Calculation of Assessment Basis statement which includes the following information. Beitragsgrundlagen: Jahr Art Monate - ges./o.B Monatl. - Ges. BG 1956 P 12 12 772 1957 P 12 12 682 1958 P 11 11 667 1959 P 10 10 1,597 1960 P 12 12 2,051 1961 P 12 12 2,315 1962 P 12 12 2,414 1963 P 12 12 2,477 1964 P 12 12 2,801 1965 P 12 12 3,228 1966 P 12 12 3,162 1975 P 10 10 3,694 1976 P 12 12 4,369 1977 P 12 12 4,905 1978 P 12 12 5,960 1979 P 12 12 6,466 1980 P 12 12 6,820 1981 P 12 12 7,045 1982 P 12 12 7,537 1983 P 12 12 8,647 1984 P 12 12 8,485 1985 P 12 12 12,367 1986 P 12 12 10,079 1987 P 12 12 9,947 1988 P 12 12 10,872 1989 P 12 12 12,595 1990 P 12 12 11,968 1991 P 09 09 13,238 Zeitenaufgliederung: von bis Monate Art der Versicherungszeit Tech.Bez 08.53 11.58 64 Pflichtversicherung als Arbeiter AP 10/2 12.58 12.58 1 Ersatzzeit für Wochengeldbezug AE 34/2 01.59 01.59 1 Ersatzzeit für Wochengeldbezug AE 34/2 02.59 02.59 1 Ersatzzeit, Zeiten der Kindererziehung AE E3/2 03.59 12.62 46 Pflichtversicherung als Arbeiter AP 10/2 01.63 12.66 48 Pflichtversicherung als Arbeiter AP 10/2 01.67 02.67 2 Ersatzzeit für Wochengeldbezug AE 34/2 03.67 03.67 1 Ersatzzeit für Wochengeldbezug AE 34/2 04.67 02.71 47 Ersatzzeit, Zeiten der Kindererziehung AE E3/2 03.71 02.75 Keine Versicherung 03.75 03.75 1 Pflichtversicherung als Arbeiter AP 10/2 04.75 09.91 198 Pflichtversicherung als Arbeiter AP 10/2 10.91 07.93 22 Ersatzzeit für Arbeitslosengeldbezug AE 38/2 Anzahl der nachgewiesenen Versicherungsmonate: Wartezeit Leistung ASVG: 357 357 Monate der Pflichtversicherung 075 075 Monate einer Ersatzzeit gesamt: 432 432 Versicherungsmonate

Claudia's UPP is calculated as follows: (i) Contributions where actual monthly salary is known : Using the average actual salary figures listed in the Beitragsgrundlagen section, Claudia is entitled to multiply the average actual salary per month by the contribution rate which applied for that month to calculate the average actual monthly contributions. As the statement shows that Claudia's contributions were compulsory contributions under the ASVG, the rates set out in Column A of Table 1 are the relevant rates. As Claudia's average monthly salaries were all below the maximum monthly threshold for each period, it is not necessary to use the maximum monthly threshold figures in the calculation. Using Table 1, Claudia's total average actual contributions are Sch185,979. Average actual contributions Period Contribution Rate Average Monthly Earnings No. of Months in Period Total Monthly Contributions (Column) (A) (B) Austrian Sch (C) (D) = (A) x (B) x (B) Austrian Sch 1/1/1956 to 31/12/1956 6.00% 772 12 556 1/1/1957 to 31/12/1957 6.00% 682 12 492 1/1/1958 to 30/11/1958 6.00% 667 11 441 1/3/1959 to 31/12/1959 6.00% 1,597 10 959 1/1/1960 to 31/12/1960 6.00% 2,051 12 1,477 1/1/1961 to 31/12/1961 6.50% 2,315 12 1,806 1/1/1962 to 31/12/1962 7.00% 2,414 12 2,028 1/1/1963 to 30/4/1963 7.00% 2,477 4 694 1/5/1963 to 31/12/1963 7.25% 2,477 8 1,437 1/1/1964 to 31/12/1964 7.50% 2,801 12 2,521 1/1/1965 to 30/4/1965 7.50% 3,228 4 969 1/5/1965 to 31/12/1965 8.00% 3,228 8 2,066 1/1/1966 to 31/12/1966 8.00% 3,162 12 3,036 1/3/1975 to 31/12/1975 8.75% 3,694 10 3,233 1/1/1976 to 31/12/1976 8.75% 4,369 12 4,588 1/1/1977 to 31/12/1977 8.75% 4,905 12 5,151 1/1/1978 to 31/12/1978 9.25% 5,960 12 6,616 1/1/1979 to 31/12/1979 9.25% 6,466 12 7,178 1/1/1980 to 31/12/1980 9.75% 6,820 12 7,980 1/1/1981 to 31/12/1981 9.75% 7,045 12 8,243 1/1/1982 to 31/12/1982 9.75% 7,537 12 8,819 1/1/1983 to 31/12/1983 9.75% 8,647 12 10,117 1/1/1984 to 31/12/1984 9.75% 8,485 12 9,928 1/1/1985 to 31/12/1985 10.25% 12,367 12 15,212 1/1/1986 to 31/12/1986 10.25% 10,079 12 12,398 1/1/1987 to 31/12/1987 10.25% 9,947 12 12,235 1/1/1988 to 31/12/1988 10.25% 10,872 12 13,373 1/1/1989 to 31/12/1989 10.25% 12,595 12 15,492 1/1/1990 to 31/12/1990 10.25% 11,968 12 14,721 1/1/1991 to 30/9/1991 10.25% 13,238 9 12,213 Total: 185,979 (ii) Contributions where actual monthly salary is not known: Using the contribution periods listed in the Zeitenaufgliederung section, Claudia is entitled to claim the average monthly contribution figures listed in Column D of Table 1. However, Claudia can only claim for those periods for which contributions were actually made (and not merely credited) and for which actual average monthly salary figures are not known. Using Table 1, Claudia's total average monthly contributions are Sch2,016. Average estimated monthly contributions Period Average Monthly Contributions No. of Months in Period Total Monthly Contributions (Column) (A) Austrian Sch (B) (C) = (A) x (B) Austrian Sch 1/8/1953 to 31/12/1953 58 5 290 1/1/1954 to 31/12/1954 67 12 804 1/1/1955 to 31/7/1955 71 7 497 1/8/1955 to 31/12/1955 85 5 425 Total: 2,016

Therefore, Claudia's total UPP is Sch187,995 (i.e., Sch185,979 plus Sch2,016). The deductible amount for section 27H purposes is her total UPP divided by the greater of her or her spouse's life expectancy. According to the 1985 to 1987 Australian Life Tables [F1] , Claudia's life expectancy at the time the pension commences is 18.56 years and her spouse's life expectancy is 12.66 years. Therefore, the deductible amount which Claudia can off-set against her pension each year is Sch187,995 divided by 18.56, i.e., Sch10,129.

Below is a detailed contents list for this Ruling: Paragraph What this Ruling is about 1 Class of person/arrangement 4 Ruling 6 (a) Deductible amount determined by the Commissioner 6 (b) The exact method for calculating deductible amount 8 (c) Currency translation 12 Date of effect 16 Explanations 17 (a) Deductible amount determined by the Commissioner 19 (A) Contributions in 1953 and later years 22 (i) Contributions where actual monthly salary is known 22 (ii) Contributions where actual monthly salary is not known 26 (B) Contributions before 1953 31 (b) The exact method for calculating deductible amount 34 Glossary 40 Tables 41 Table 1 - 1953 to 2000 ASVG (Compulsory Contributions) Page 12 Table 2 - 1953 to 2000 ASVG (Voluntary Contributions) Page 14 Table 3 - 1958 to 2000 GSVG (Compulsory Contributions) Page 16 Table 4 - 1958 to 2000 GSVG (Voluntary Contributions) Page 18 Table 5 - 1978 to 2001 BSVG (Compulsory Contributions) Page 20 Table 6 - 1978 to 2001 BSVG (Voluntary Contributions) Page 21 Table 7 - All contributions prior to 1953 Page 22 Example 42 Detailed contents list 46 Your comments 47

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