ATO ID 2003/180: Assessability of Swiss government pension received by Australian resident
Date of decision: 10 March 2003
Year of income: Year ended 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005 Year ending 30 June 2006
Business line: Public Groups and International

Issue
Is a Swiss government pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. A Swiss government pension received by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.

Facts
The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a government pension from Switzerland. The pension does not relate to the Swiss legislation relating to military insurance.

Reasons for decision
Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 15 to the Agreements Act contains the agreement between Australia and Switzerland (the Swiss Agreement). Paragraph (1) of Article 18 of the Swiss Agreement provides that pensions and annuities paid to a resident of Australia are taxable only in Australia. Subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement provides that pensions received from Switzerland under the legislation concerning military insurance will be exempt from Australian tax if they are exempt from Swiss tax. The pension received by the taxpayer is not related to military insurance and therefore is not exempt from tax under subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement. As the taxpayer is an Australian resident for income tax purposes, the Swiss government pension is assessable under subsection 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2)
Subject references: Double Tax Agreements Foreign pension Foreign pension income International tax Switzerland