ATO ID 2003/544: Assessability of Belgian retirement pension received by Australian resident
Date of decision: 20 June 2003
Year of income: Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002
Business line: Public Groups and International

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

Decision
Yes. The Belgian retirement 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 retirement pension from Belgium. The pension is paid by the Belgian Government under the Belgian Social Security system. The taxpayer did not make any contributions to obtain the pension.

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 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, 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 the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 13 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Belgium (the Belgian Agreement). Schedule 13A to the Agreements Act contains the protocol amending the Belgian Agreement (the Belgian Protocol). The Belgian Agreement and the Belgian Protocol operate to avoid the double taxation of income derived by Australian and Belgian residents. Article 18(1) of the Belgian Agreement provides that pensions and annuities paid to a resident of Australia will be taxable only in Australia. As the taxpayer is a resident of Australia for income tax purposes, the assessable income of the taxpayer will include the Belgian retirement pension received under subsection 6-5(2) of the ITAA 1997.

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