Private ruling: Assessability of pension income
Date of advice: 20 March 2017
Published: August 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2017

Ruling: Q1: Is your government Retirement and Death Benefit (RDB) spouse's benefit assessable in Australia? | A1: No.

Relevant facts and circumstances: You are a foreign resident for tax purposes. You are a Country Y citizen who resides in Country Y. Your spouse was an employed by an Australian government agency. You have been receiving government RDB spouse's benefits since your spouse's death a number of years ago.

Relevant legislative provisions: Taxation Administration Act 1953 Section Sch1-12-80 | Income Tax Assessment Act 1997 Subsection 6-5(3) | International Tax Agreements Act 1953

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. Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes all ordinary income derived from all Australian sources. Pension payments are ordinary income for the purposes of subsection 6-5(2) and 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a foreign resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty. The tax treaty between Australia and Country Y contains Article XX which specifically deals with the taxation of pensions and annuities income. This Article provides that pensions paid to an individual who is a resident of Country Y, shall be taxed only in the Country Y. Therefore, as you are a resident of Country Y, article XX of the tax treaty will apply and the RDB pension you receive will be exempted income in Australia and not assessable under section 6-5(3) of the ITAA 1997.