Private ruling: Foreign sourced income - pension
Date of advice: 13 April 2018
Published: July 2018
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 July 2015

Ruling: Q1: Does your war disability pension from country X need to be added to foreign income in your income tax return? | A1: No | Q2: Is your war disability pension which you receive from country X exempt from tax in Australia? | A2: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You have applied for an extension of the previous private ruling. You are a permanent resident of Australia. You receive a War Pension from country X. The pension is of a kind specified in section 315 of the Income and Corporation Taxes Act 1988 of country X. Your war pension is tax free in country X.

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

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Included in the list of exempt income in section 11-5 of the Income Tax Assessment Act 1997 (ITAA 1997) 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 sub-section 315(2) of the Income and Corporation Taxes Act 1988 of Country X; and b) similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997. Subsection 315(2) of the Income and Corporation Taxes Act 1988 of Country X provides that income from wounds and disability pensions are exempt from income tax if they are: a) wounds pensions granted to members of the naval, military or air forces of the Crown; or b) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service. 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. 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 serving in the armed forces. The pension is the same type as payments paid under subsection 315(2) of the Income and Corporation Taxes Act 1988 of Country X. Therefore your pension meets the first requirement for exemption under section 53-10 of the ITAA 1997. Accordingly, your country X war disability pension is exempt from tax in Australia.