Private ruling: Residency for tax purposes and assessability of pension income
Published: March 2014
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ended 30 June 2013 | 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 2009

Ruling: Questions and answers | 1. Are you a resident of Australia for tax purposes? | No. | 2. Is your pension income assessable in Australia? | No.

Relevant facts and circumstances: You and your spouse sold your house in Australia and moved with all your possessions to Country X in 2009. You have been a permanent resident of Country X since 2009. You receive Australian pension income.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Section 5

Reasons for decision: Detailed Reasoning - Residency for tax purposes: Generally where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. The terms 'resident' and 'resident of Australia', in regard to an individual, are defined within the tax provisions and provides four tests to ascertain the residency status. Relevant to your situation are the first two tests which are examined in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, a copy of which is available from www.ato.gov.au. Given regard to your circumstances as a whole and a consideration of the relevant residency tests, it is accepted that you are not a resident of Australia for tax purposes. | Detailed Reasoning - Assessability of pension income: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are a foreign resident, your assessable income includes the ordinary income you derive directly or indirectly from all Australian sources. However, 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 Country X (applicable country) Agreement 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 Country X agreement operates to avoid the double taxation of income received by residents of Australia and Country X. Article 18 of the Country X provides that pensions (including government pensions) and other similar periodic remuneration paid to a resident of Country X shall be taxable only in Country X. In your case, you are receiving Australian pension income. As this income is not taxable in Australia, you are not required to include it in your Australian income tax return.