Private ruling: Foreign source income - pension
Published: November 2014
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017
Date scheme commenced: The scheme has commenced

Ruling: Question and Answer | Is your foreign pension assessable income? | No.

Relevant facts and circumstances: You are a resident of Australia. You were medically discharged from the armed services of a foreign country. As the disability for which you were discharged was accepted by the government of the foreign country as attributable to your military service, the pension is exempt from taxation in the foreign country.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 53-10 | Income Tax Assessment Act 1936 Paragraph 23AD(3)(c) | Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 6-15(2) | Income Tax Assessment Act 1997 Section 11-5 | Income Tax Assessment Act 1997 Section 52-65

Reasons for decision: Summary: Included in the list of exemption income in ITAA 1997 section 11-5 is section 53-10 of the ITAA 1997 which deals with wounds and disability pensions. Section 53-10 of the ITAA 1997 provides that wounds and disability pensions (Item 5) are wholly exempt provided that the payment is: (a) of a kind specified in a law of the foreign country; and (b) similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997. A law of the foreign country provides that income from wounds and disability pensions are exempt from income tax if they are: (a) wounds pensions granted to members of the armed forces of the foreign country; or (b) disablement or disability pensions granted to members, of the armed forces of the foreign country. Section 53-10 of the ITAA 1997 has equivalent wording to the repealed paragraph 23AD(3)(c) of the Income Tax Assessment Act 1936 (ITAA 1936). The application of paragraph 23AD(3)(c) of the ITAA 1936 is considered in Taxation Ruling IT 2586 - Income tax: wounds and disability pensions paid by foreign government: whether exempt (IT 2586). IT 2586 states that the Commissioner accepts that the exemption provided in paragraph 23AD(3)(c) of the ITAA 1936 applies to any such pensions payable by any government and the exemption applies irrespective of the age of the pensioner. As the wording of paragraph 23AD(3)(c) of the ITAA 1936 is equivalent, in all relevant respects, to section 53-10 of the ITAA 1997 it is appropriate that the reasoning in IT 2586 should be applied to the interpretation of section 53-10 of the ITAA 1997. In your case, the pension received by you is a war disability pension paid by reason of your disability arising out of wounds and injuries suffered while a member of the armed forces of the foreign country. The pension is of the same type as payments under the law of the foreign country, therefore your pension meets the first requirement for exemption under section 53-10 of the ITAA 1997. Accordingly, your war disability pension is exempt under section 53-10 of the ITAA 1997.