Private ruling: Foreign pension
Date of advice: 11 December 2015
Published: February 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Questions and answers | Is the Pension you receive from Country A assessable in Australia? | No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You were granted a Pension. The pension is paid to you monthly in overseas currency.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5. | Income Tax Assessment Act 1997 subsection 6-5(2). | Income Tax Assessment Act 1997 subsection 6-20(1). | International Tax Agreements Act 1953 section 4.

Reasons for decision: Summary: You are a resident of Australia for tax purposes, as a result you are subject to Division 6 of the Income Tax Assessment Act 1997 (ITAA 1997). Under sub-section 6-5(2) of the ITAA 1997 the assessable income of a person who is an Australian resident includes the ordinary income the person derives directly or indirectly from all sources, whether in or out of Australia. Sub-section 6-20(1) of the ITAA 1997 states that an amount of income is exempt income if it is made exempt from income tax by a provision of this Act. Therefore, a resident of Australia will be assessed on all income, including pensions received from another country unless it is exempted under the Act. Section 4 of the International Tax Agreements Act 1953 (ITAA 1953) provides for it to be incorporated with, and read as one with, the ITAA 1997. A Double Taxation Agreement is an agreement entered into by two countries for the purpose of avoiding double taxation and preventing fiscal evasion with respect to income taxes. Relief from double taxation is achieved by the contracting countries reciprocally agreeing to forgo taxation on certain categories of income. Australia and the Country A have such an agreement. Article XX(2) of the Agreement states: Social Security payments and other public pensions paid by one of the Contracting States to an individual who is a resident of the other Contracting State or a citizen of the Country A shall be taxable only in the first-mentioned State. For the purposes of your circumstances, the terms 'one of the Contracting States' and 'the first-mentioned State' refer to the Country A and the term 'the other Contracting State' refers to Australia. In accordance with Article 18(2), a pension paid by Country A to an Australian resident is taxable only in Country A. Where an amount is specified as being taxable only in one of the countries under a Double Taxation Agreement - the amount is exempt from taxation in the other country. Therefore, under section 6-5 of the ITAA 1997 the social security pension you receive from Country A is exempt from taxation in Australia. Please note that if you have previously included this income in your tax returns you will need to request an amendment to the applicable years. To do so, you will need to send in a written request quoting your tax file number, the amount to be amended and you can make reference to this private ruling using reference number #.