ATO ID 2003/1153: Assessability of an Austrian disability pension
Date of decision: 4 December 2003
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Is a foreign disability pension received by a resident of Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. The foreign disability pension received by a resident of Australia is assessable under subsection 6-5(2) of the ITAA 1997.

Facts
The taxpayer is an Australian citizen and an Australian resident for taxation purposes. The taxpayer receives a foreign disability pension from Pensionsversicherungsanstalt der Arbeiter , a government pension fund. The pension is not in respect of government services.

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 disability pension 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). 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 27 to the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Article 18(1) of the Austrian Agreement provides that a pension payable to a resident of Australia shall be taxable only in Australia. As the taxpayer is a resident of Australia, their pension will be assessable under subsection 6-5(2) of the ITAA 1997.

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