ATO ID 2006/163: Foreign source income: pensions - non-assessable non-exempt income and temporary residents
Date of decision: 23 June 2006
Year of income: 30 June 2007
Business line: International Centre of Expertise

Issue
Can is the taxpayer, a temporary resident of Australia, who derived pension income from the United Kingdom (UK) which is non-assessable non exempt income under Australia's temporary residents measure, choose to have the pension income taxed in Australia?

Decision
No. The taxpayer, who is a temporary resident of Australia cannot choose to have pension income from the UK, which is non-assessable non-exempt income under Australia's temporary residents measure, taxed in Australia.

Facts
The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the UK while the taxpayer was a temporary resident of Australia. The taxpayer's UK sourced pension income is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension income derived by the taxpayer from the UK is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Section 768-910 of the ITAA 1997 provides that foreign income, other than employment related income and capital gains on shares and rights acquired under employee share schemes, is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia. Accordingly, UK pension income is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia. Subsection 6-15(3) of the ITAA 1997 provides that if an amount that is non-assessable non-exempt income, it is not assessable income. As such, the taxpayer's pension income from the UK is not assessable income. Subdivision 768-R does not allow a person who is a temporary resident to make an election to have foreign source income, which is non-assessable non-exempt income, treated as assessable income for Australian tax purposes. Therefore, the taxpayer cannot choose to have their UK pension income, which is non-assessable non-exempt income, taxed in Australia.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2) Subdivision 768-R section 768-910 subsection 995-1(1)
Related ATO interpretative decisions: ATO ID 2006/161 | ATO ID 2006/162
Subject references: Double tax agreements Foreign pension income International tax Resident/residency United Kingdom Temporary resident