Private ruling: Foreign pension
Date of advice: 6 May 2016
Published: June 2016
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the foreign pension you receive assessable in Australia? | A1: Yes. | Q2: Are you entitled to a foreign income tax offset? | A2: No.

Relevant facts and circumstances: You are a resident of Australia for tax purposes and an Australian citizen. You were a sportsperson in country A. You have made an application to receive a pension from a pension plan in country A. You are not classed as a resident in country A. The plan will deduct tax from your payments in country A. You will start receiving payments in the near future.

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 6-10(4). | Income Tax Assessment Act 1997 Section 10-5. | International Tax Agreements Act 1953 Section 4.

Reasons for decision: Summary: Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuity and superannuation pensions are included in assessable income. Article # of the country A Convention (the double tax agreement between Australia and country A) provides that subject to the provisions of Article #, pensions paid to an individual who is a resident of Australia in consideration of past employment shall be taxable only in Australia. Article # of the country A Convention defines 'pensions' as periodic payments made by reasons of retirement or death, in consideration for services rendered or by way of compensation paid after retirement for injuries received in connection with past employment. Article # of the country A Convention provides that pensions paid from funds of the country A for labour or personal services performed as an employee in the discharge of governmental functions to a citizen of country A shall be exempt from tax in Australia. As you are a citizen of Australia, Article # of the country A Convention does not apply to exempt the tax on the country A pension in Australia. Accordingly, the country A pension you receive is included in your assessable in Australia under section 27H of the ITAA 1936 and forms part of your assessable income under subsection 6-10(4) of the ITAA 1997. You will need to contact the administrators of the plan and advise them that under the double tax agreement with Australia they should not be withholding tax from your pension. The pension is only taxable in Australia. | Detailed Reasoning - Foreign income tax offset: If you have assessable income from overseas, you must declare it in your Australian income tax return. If you have paid foreign tax in another country, you may be entitled to an Australian foreign income tax offset, which provides relief from double taxation. You have advised that you will have tax withheld from your payments. Under the double tax agreement between Australia and the country A your pension is only taxable in Australia. There should not be any tax withheld in country A. A foreign tax offset will not be applicable in your case.