Private ruling: Assessable income
Date of advice: 6 October 2017
Published: March 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2017

Ruling: Q1: Is your Country X war disablement pension assessable income? | A1: No

Relevant facts and circumstances: You are a resident of Australia. You have been assessed by the Country X Authority as having a level of disablement from military service at a certain percentage. As the disability was accepted as attributable to your army service, the pension was exempt from taxation in Country X.

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 Income Tax Assessment Act 1997 (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 sub-section 315(2) of the Income Tax Act (the Act) 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 Act 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; or (b) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces 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 Section 53-10 of the ITAA 1997 has equivalent wording to the repealed paragraph 23AD(3)(c) of the Income Tax Assessment Act 1936 (ITAA 1936).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 Income tax: wounds and disability pensions paid by foreign government: whether exempt . 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 Country X armed forces. The pension is of the same type as payments under subsection 315(2) of the Act. 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 under section 53-10 of the ITAA 1997. | Detailed Reasoning - Further information: The Commissioner does not rule for indefinite or extended periods of time as there may be changes to the facts of the arrangement or the law relating to wounds and disability pensions. Also, a public ruling may issue which affects the private ruling. Therefore, we have ruled for the 2018FY to 2022FY.