Private ruling: Taxation of pension income
Published: October 2013
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will your Australian pension income be taxable in Australia? | No.

Relevant facts and circumstances: You are an Australian citizen and a resident of Australia for taxation purposes. You are in receipt of a Commonwealth Superannuation Scheme pension. Your pension is comprised of a taxable component and a tax free component. You are moving to country X to live on a permanent basis. You will be a non-resident of Australia for taxation purposes. You will be a resident of country X for taxation purposes.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 27H | Income Tax Assessment Act 1997 Subsection 6-10(5) | International Tax Agreements Act 1953

Reasons for decision: Summary: Subsection 6-10(5) of the Income Tax Assessment Act 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 27H of the Income Tax Assessment Act 1936 includes annuities and superannuation pensions as assessable income. Foreign residents are not entitled to the tax free threshold on Australian sourced income and pay tax at non-resident rates. In determining liability to tax on Australian sourced income received by a foreign resident, 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 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 Agreement with country X is listed in section 5 of the Agreements Act. The country X 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 country X. An article of the Agreement states that pensions (including government pensions) and other similar periodic remuneration paid to a resident of either Australia or country X will be taxable only in the country of which the individual is a resident. However, such income that arises in Australia will not be taxed in country X if it would not be subject to taxation in Australia if the individual was a resident of Australia. In applying the provisions of the Agreement to your circumstances, when you become a non-resident of Australia and a resident of country X for taxation purposes, your superannuation pension will not be taxable in Australia. Therefore, your pension income will not have to be included as assessable income in your Australian income tax return.