ATO ID 2003/1022: Assessability of a European Union pension received by a resident taxpayer
Date of decision: 5 November 2003
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Is a pension paid by an institution of the European Union (EU) received by a resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. A pension paid by an institution of the EU received by a 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 is a former employee of an institution of the EU. The taxpayer receives a pension in respect of their previous employment with the institution.

Reasons for decision
Summary: Subsection 6-5(2) of the ITAA 1997 provides that the 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. A pension received in respect of previous employment is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, 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). Australia has entered into double taxation agreements with a number of the member countries of the EU. However, Australia does not have a double taxation agreement with the EU. Accordingly, as the taxpayer is a resident of Australia, the pension received by the taxpayer in respect of former employment with an institution of the EU is assessable under subsection 6-5(2) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2)
Subject references: European Union Foreign pension income Foreign tax credits