Undeducted Purchase Price/Deductible Amount

From 1 July 2007, life expectancy has been removed as a factor in determining the tax-free and taxable components of a superannuation pension.

The deductible amount for income tax purposes is the tax-free component of the pension/annuity received.

Tax-Free Component
From 1 July 2007 the tax-free component is made up of:

1) The crystallised amounts of the following components held in a superannuation account as at 30 June 2007 being Pre-July 83 component; Concessional component; Undeducted contributions; The CGT exempt component and Post-June 94 invalidity component.

and

2) Government Co-contributions, Spouse Contributions and Non-concessional Contributions made from 1 July 2007.

Up to 30 June 2007, the deductible amount was calculated as follows:

(1) Undeducted Purchase Price  less  Residual Capital Value

(2) Relevant Number

(1) The definition of ‘Undeducted Purchase Price’ has changed five times since 1 July 1994 (see below).

(2) The ‘Relevant number’ is either the term of the pension or the life expectancy of the owner or spouse, depending on the type of product and the choices made.

Definition of Undeducted Purchase Price