Private ruling: Foreign pension income
Published: August 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Is the pension you receive assessable in Australia? | No.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are a citizen of Country Y. You receive a pension from 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. 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 XX of the country Y agreement considers the tax treatment of Pensions, Annuities, Alimony and Child Support. The relevant paragraph in your case is paragraph 2 of article XX of the country Y agreement. 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 country Y shall be taxable only in the first-mentioned State. Consequently your pension will not be taxed in Australia under article XX of the DTA between Australia and Country Y as according to article XX Country Y has the taxing rights as you are a citizen of the country Y.