Private ruling: Assessable income - foreign pension
Date of advice: 21 July 2023
Published: 11 September 2023
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the social security benefit you receive from Country X included in your assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. Generally, 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. However, Article X of the Country X Agreement provides that social security payments by Country X to a resident of Australia shall only be taxed in Country X. Accordingly, the social security benefit you receive is therefore not assessable income under section 6-5 of the ITAA 1997 as you are a resident of Australia.

Relevant facts and circumstances: You are an Australian citizen. Your ex-spouse lives in Country X. You receive a benefit from a department in Country X. In July 20XX, you retired and then commenced receiving the benefit. The benefit is ongoing and is received in arrears of the issue date. The benefit is paid in Country X currency and is then direct debited into your Australian bank account in Australian dollars. The benefit includes Country X withholding tax. The benefit is indexed to inflation by the department in Country X. Your benefit is the only income you receive from Country X. You do not earn any other foreign income. You are not required to complete a tax return in Country X. You will continue to receive the benefit for the rest of your life unless there is a change in your eligibility.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | International Tax Agreements Act 1953