ATO ID 2007/126: Assessability of a War Time Persecution Pension paid by Austria
Date of decision: 22 May 2007
Year of income: Year ended 30 June 2007
Business line: Small Business/Individual Taxpayers

Issue
Is the taxpayer, a resident of Australia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) on a war time persecution pension received from Austria?

Decision
No. The taxpayer, a resident of Australia, is not assessable under subsection 6-5(2) of the ITAA 1997 on a war time persecution pension received from Austria as it is exempt income under subsection 768-105(1) of the ITAA 1997.

Facts
The taxpayer is a resident of Australia. The taxpayer is entitled to a pension from the Austrian government as a victim of National Socialist (Nazi) persecution during World War II. The payment was not directly or indirectly from any of the taxpayer's associates.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident of Australia includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension payments are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not assessable income. Section 768-105 of the ITAA 1997 provides an exemption for compensation payments arising out of Second World War. Subsection 768-105(1) of the ITAA 1997 provides that a payment is exempt from income tax if: The taxpayer is an Australian resident when the payment is made. The pension is paid by the Austrian Government to the taxpayer under a law of Austria. The pension was paid as a result of the persecution by the national Socialist regime of Germany during the National Socialist period. The payment was not directly or indirectly from any of the taxpayer's associates. Therefore, the taxpayer's pension falls within the meaning of subsection 768-105(1) of the ITAA 1997 and is exempt from tax in Australia. Accordingly, the pension is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) section 768-105 subsection 768-105(1)
Related ATO interpretative decisions: ATO ID 2002/592 | (withdrawn - date of withdrawal effective from 14 September 2006)
Subject references: Austria Exempt income Foreign pension income International tax Lump sum payments in arrears