Private ruling: Foreign pension
Date of advice: 25 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is the lump sum payment you received from overseas assessable in Australia? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are a resident of Australia for taxation purposes. You will receive a lump sum payment from an overseas pension scheme. The lump sum payment is not assessable overseas.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 52-10(1A) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Schedule 1 Article 17.

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. Assessable income consists of ordinary income and statutory income provided it is neither exempt nor non-assessable non-exempt income. In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (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 overseas Agreement is listed in section 5 of the Agreements Act. The agreement operates to avoid the double taxation of income received by residents of Australia and the overseas country. Article XX of the DTA between Australia and the overseas country considers pensions and annuities. It says that pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State. In your case you are a resident of Australia for taxation purposes and therefore the lump sum payment will be taxed in Australia under Article XX. The lump sum payment is paid to you by an overseas pension scheme. The lump sum payment is therefore considered to be a pension payment which is deferred until you turn 60 years of age. There is no legislation under the Australian tax system which allows for an exemption from tax on the overseas lump sum payment. The lump sum payment must be declared in your Australian tax return.