Private ruling: foreign social security income
Date of advice: 28 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Question and answer | Is the payment received by you from the Country Y Government assessable income in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You receive a payment from the Country Y Government. You do not pay tax on this payment in Country Y.

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 18

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. Pension income is ordinary income assessable under subsection 6-5(2) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA1997 or another Commonwealth law. 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 Y agreement) is listed in section 5 of the Agreements Act. The agreement between Australia and Country Y operates to avoid the double taxation of income received by residents of Australia and Country Y. Article 18 of the Country Y agreement considers the tax treatment of pensions. 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 (other than payments of portable Country Y superannuation or portable veteran's pension or equivalent portable payments arising in Country Y) 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. Accordingly, your Country Y portable payment is assessable in Australia.