ATO ID 2006/23: Assessability of an Australian pension received by a resident of Malta
Date of decision: 21 December 2005
Year of income: Year ended 30 June 2006
Business line: Public Groups and International

Issue
Is the taxpayer, a resident of Malta, assessable on their Australian sourced pension(s) under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. The taxpayer, a resident of Malta, is not assessable on their Australian sourced pension(s) under subsection 6-5(3) of the ITAA 1997.

Facts
Taxpayer receives a part age pension, Comsuper pension, and an allocated pension from Commonwealth Bank. The taxpayer is an Australian citizen who departed Australia in 2005 to live in Malta permanently. The taxpayer ceased to be a resident of Australia for taxation purposes when they departed Australia in 2005.

Reasons for decision
Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non resident's assessable income under subsection 6-10(5) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non resident it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and ITAA 1997 so that those Acts are read as one. Schedule 24 of the Agreements Act contains the tax treaty between Australia and Malta (the Maltese Agreement). The Maltese Agreement operates to avoid the double taxation of income received by Australian and Maltese residents. Article 18 of the Maltese Agreement deals with pensions and annuities. Article 18(1) of the Maltese Agreement provides that an Australian sourced pension paid to an individual who is a resident of Malta shall be taxable only in Malta. As the taxpayer is a resident of Malta, the Australian sourced pension they receive will not be assessable under subsection 6-5(3) of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 section 6-5 subsection 6-5(3) subsection 6-10(5) section 10-5
Subject references: Double tax agreements Foreign pension income Non resident individual Tax free threshold Resident/residency