Private ruling: Foreign income - pension
Published: February 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the pension that you receive from Country X assessable in Australia? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You receive a pension from Country X. You do not pay any tax on your pension in Country X. Australia has a tax treaty with Country X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2), | International Tax Agreements Act 1953 Section 4 and | International Tax Agreements Act 1953 Section 5.

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. A pension would generally be considered to be ordinary income as it is a regular recurrent payment that is relied upon. In determining the liability of an Australian resident to Australian tax on foreign sourced income, it is necessary to consider not only the Australian tax laws but also any applicable tax treaty. Tax treaties are given the force of law domestically by the International Tax Agreements Act 1953 (the Agreements Act). The Agreements Act states that where there are inconsistencies with an Act imposing Australian tax, the Agreements Act will prevail (except in relation to tax avoidance schemes). An article in the treaty between Australia and Country X provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia. Accordingly, as you are a resident of Australia, the pension that you receive from Country X is required to be included in your assessable income under subsection 6-5(2) of the ITAA 1997.

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