ATO ID 2006/161: Foreign source income: pension - temporary residents
Date of decision: 23 June 2006
Year of income: 30 June 2007
Business line: Public Groups and International

Issue
Is the taxpayer, who is a temporary resident of Australia, assessable in Australia on United Kingdom (UK) sourced pension income?

Decision
No. The taxpayer who is a temporary resident of Australia is not assessable in Australia on UK sourced pension income.

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.

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. The pension income derived by the taxpayer from the UK is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, Subdivision 768-R of the ITAA 1997 provides tax relief for most foreign income derived by temporary residents of Australia. In particular, section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source, excluding 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 temporary resident of Australia. The taxpayer's pension income from the UK, being ordinary income from a foreign source, is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997 as the taxpayer was a temporary resident of Australia when the taxpayer derived it. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income, it is not assessable income. Therefore, the taxpayers pension income from the UK is not assessable income.

Legislative references: Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(3) Subdivision 768-R section 768-910 subsection 995-1(1)
Related ATO interpretative decisions: ATO ID 2006/162 | ATO ID 2006/163
Subject references: Foreign pension income International tax Resident/residency United Kingdom Temporary resident Non-assessable non-exempt income