Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision AA - Non-superannuation annuities etc.  

SECTION 27H   ASSESSABLE INCOME TO INCLUDE ANNUITIES AND SUPERANNUATION PENSIONS  

27H(1)   [Assessable income]  

Subject to Division 54 of the Income Tax Assessment Act 1997 , the assessable income of a taxpayer of a year of income shall include:

(a) the amount of any annuity derived by the taxpayer during the year of income excluding, in the case of an annuity that has been purchased, any amount that, in accordance with the succeeding provisions of this section, is the deductible amount in relation to the annuity in relation to the year of income; and

(b) the amount of any payment made to the taxpayer during the year of income as a supplement to an annuity, whether the payment is made voluntarily, by agreement or by compulsion of law and whether or not the payment is one of a series of recurrent payments.

Note:

Division 54 of the Income Tax Assessment Act 1997 provides a tax exemption for certain payments under structured settlements and structured orders.

27H(1A)    
(Repealed by No 15 of 2007)

27H(2)   [ " deductible amount " ]  

Subject to subsections (3) and (3A), the deductible amount in relation to an annuity derived by a taxpayer during a year of income is the amount (if any) ascertained in accordance with the formula

A (B − C)   , D

where:

A is the relevant share in relation to the annuity in relation to the taxpayer in relation to the year of income.

B is the amount of the undeducted purchase price of the annuity.

C is:

(a) if there is a residual capital value in relation to the annuity and that residual capital value is specified in the agreement by virtue of which the annuity is payable or is capable of being ascertained from the terms of that agreement at the time when the annuity is first derived - that residual capital value; or

(b) in any other case - nil; and

D is the relevant number in relation to the annuity.

27H(3)   [Commissioner may determine deductible amount]  

Subject to subsection (3A), where the Commissioner is of the opinion that the deductible amount ascertained in accordance with subsection (2) is inappropriate having regard to:

(a) the terms and conditions applying to the annuity; and

(b) such other matters as the Commissioner considers relevant,

the deductible amount in relation to the annuity derived by the taxpayer during the year of income is so much of the annuity as, in the opinion of the Commissioner, represents the undeducted purchase price having regard to:

(c) the terms and conditions applying to the annuity;

(d) any certificate or certificates of an actuary or actuaries stating the extent to which, in the opinion of the actuary or actuaries, the amount of the annuity derived by the taxpayer during the year of income represents the undeducted purchase price; and

(e) such other matters as the Commissioner considers relevant.

27H(3A)   [Where annuity commuted]  

For the purposes of this section, where the annuity derived by a taxpayer during a year of income is part of an annuity of which a part has been commuted in the year of income or a preceding year of income, the deductible amount ascertained under subsection (2) or (3) shall be reduced by such amount as, in the opinion of the Commissioner, is appropriate having regard to:

(a) (Repealed by No 15 of 2007)

(b) (Repealed by No 15 of 2007)

(c) any deductible amount ascertained under this section in relation to the annuity in relation to a preceding year of income; and

(d) such other matters as the Commissioner considers relevant.

27H(4)   [Definitions]  

In this section:

actuary
means a Fellow or Accredited Member of the Institute of Actuaries of Australia.

agreement
means any agreement, arrangement or understanding whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

annuity
means an annuity, a pension paid from a foreign superannuation fund (within the meaning of the Income Tax Assessment Act 1997 ) or a pension paid from a scheme mentioned in paragraph 290-5(c) of that Act, but does not include:

(a) an annuity that is a qualifying security for the purposes of Division 16E ; or

(b) a superannuation income stream (within the meaning of the Income Tax Assessment Act 1997 ).

approved actuary
(Omitted by No 35 of 1990)

life expectation factor
, in relation to a person in relation to an annuity, means the number of years in the complete expectation of life of the person as ascertained by reference to the prescribed Life Tables at the time at the beginning of the period to which the first payment of the annuity relates.

purchase price
means:

(a) in relation to a pension - the sum of:

(i) contributions made by any person to a foreign superannuation fund to obtain the pension; and

(ii) so much as the Commissioner considers reasonable of contributions made by any person to a foreign superannuation fund to obtain superannuation benefits including the pension; and

(b) in relation to an annuity other than a pension - the sum of:

(i) payments made solely to purchase the annuity; and

(ii) so much as the Commissioner considers reasonable of payments made to purchase the annuity and to obtain other benefits.

relevant number
, in relation to an annuity in relation to a year of income, means:

(a) where the annuity is payable for a term of years certain - the number of years in the term;

(b) where the annuity is payable during the lifetime of a person and not thereafter - the life expectation factor of the person; and

(c) in any other case - the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be expected to be, payable.

relevant share
, in relation to an annuity derived by a taxpayer during a year of income, means:

(a) in a case where the annuity derived by the taxpayer is a share of an annuity (which annuity is in this paragraph referred to as the total annuity ) payable to the taxpayer and another person or other persons - the fraction ascertained by dividing the number of whole dollars in the amount of the annuity derived by the taxpayer during the year of income by the number of whole dollars in the amount of the total annuity derived during the year of income by the taxpayer and the other person or persons; or

(b) in any other case - the number 1.

residual capital value
, in relation to an annuity, means the capital amount payable on the termination of the annuity.

undeducted purchase price
, in relation to an annuity, has the meaning given by section 27A immediately before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007 .

27H(5)   [ " purchase price " ]  

In the definition of purchase price in subsection (4):

(a) a reference to contributions made by any person to a foreign superannuation fund to obtain a pension does not include a reference to contributions made to a foreign superannuation fund by an employer, or by another person under an agreement to which the employer is a party, for the purpose of providing superannuation benefits for, or for dependants of, an employee of the employer; and

(b) a reference to payments made to purchase, or solely to purchase, an annuity (other than a pension) does not include a reference to payments made by an employer, or by another person under an agreement to which the employer is a party, to purchase, or solely to purchase, the annuity for, or for dependants of, an employee of the employer.

27H(6)   [ Meaning of employer of another person]  

For the purposes of subsection (5), in determining whether a person is an employer of another person, treat the holding of an office by the other person as employment of that person.