ATO ID 2001/382: Exempt Income: United States Social Security Benefit
Date of decision: 29 August 2001
Business line: Small Business/Individual Taxpayers

Issue
Is a Social Security benefit received from the United States of America (USA) included in a taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No, a Social Security benefit received from the USA is not included in a taxpayer's assessable income under section 6-5 of the ITAA 1997.

Facts
The taxpayer is an Australian resident for income tax purposes. The taxpayer receives a social security benefit from the USA.

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.. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operate to prevent the double taxation of income. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Paragraph 18(2) of Schedule 2 of the Agreements Act provides that Social Security payments by the USA to a resident of Australia shall only be taxed in the USA. The Social Security benefit received by the taxpayer is therefore not assessable income under section 6-5 of the ITAA 1997, but is subject to tax in the USA.

Legislative references: Income Tax Assessment Act 1997 section 6-5
Subject references: Foreign income Foreign pension Foreign pension income Double tax agreements Social security pensions and allowances