Private ruling: Assessability of a foreign pension
Date of advice: 30 June 2016
Published: August 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Question and Answer | Is the pension you receive from a foreign country assessable in Australia? | No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You are a citizen of Australia and also of the foreign country. You receive a certain payment from the foreign country. You lodge tax returns in the foreign country and include the payment in those tax returns. The pension is also included in your Australian income tax returns, as assessable foreign source income.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953 Section 4

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident for tax purposes includes ordinary income derived directly or indirectly from all sources during the income year. In determining liability to tax on Australian sourced income received by a foreign taxpayer, 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). A foreign country agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The agreement operates to avoid the double taxation of income received by residents of Australia and a foreign country. Paragraph X of the foreign country Convention provides that certain payments by the foreign country shall only be taxed in the foreign country. In your case, you are an Australian resident for taxation purposes who receives a certain payment from the foreign country. Therefore, the payment you receive from the foreign country is not included in your assessable income in Australia under section 6-5 of the ITAA 1997, but can be subject to taxation in the foreign country.