Private ruling: Assessable income
Date of advice: 20 January 2022
Published: April 2022
Ruling period: Year ended 30 June 2021 | Year ending 30 June 2022 | Year ending 30 June 2023 | Year ending 30 June 2024 | Year ending 30 June 2025
Date scheme commenced: 1 July 2020

Ruling: Q1: Is your Country Z pension assessable in Australia? | A1: No.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are in receipt of a Country Z Government pension which is paid into your Australian bank account. You have supplied a copy of a letter from the administrators of the Country Z government pension scheme stating your pension is not assessable in either Country Z or Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Subsection 6-10(4) | Income Tax Assessment Act 1997 Section 10-5 | Income Tax Assessment Act 1936 Section 27H | 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 a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Under subsection 6-10(4) of the ITAA 1997, the assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country Z Agreement is listed in section 5 of the Agreements Act. The Country Z Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country Z Agreement operates to avoid the double taxation of income received by residents of Australia and Country Z. The Australia - Country Z Income Tax Treaty (2009) states at Article 18: 1. Pensions (including government pensions) and other similar periodic remuneration paid to a resident of a Contracting State shall be taxable only in that State. However, such income arising in the other Contracting State ... shall not be taxed in the first-mentioned State to the extent that such income would not be subject to tax in the other State if the recipient were a resident of that other State. In your case, your Country Z superannuation pension is not assessable in Australia under section 27H of the ITAA 1936, as it is exempt from tax in Country Z. | Detailed Reasoning - Other information: As your government pension income is not assessable in Australia it is not included on your Australian income tax return.