Private ruling: Foreign income
Published: August 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Is your foreign source invalidity benefit assessable in Australia? | Yes.

Relevant facts and circumstances: You have been residing in Australia permanently for several years. You are an Australian resident for taxation purposes. You receive an ‘invalid’s benefit’ from the Country X government which is paid on a monthly basis. The benefit you receive is described as a ‘portable’ amount by the Country X government. The payment you receive is not related to military service.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1936 Section 27H | International Tax Agreements Act 1953

Reasons for decision: Summary: Sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of an Australian resident includes their ordinary and statutory income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Foreign pensions and similar payments are included in assessable income under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). In determining liability to Australian tax on foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). The Agreements Act contains the double tax convention between Australia and Country X (the convention). The convention operates to avoid the double taxation of income received by Australian and Country X residents An article of the Country X convention provides that pensions (including government pensions) and other similar payments paid to a resident of Australia will be taxable only in Australia. These payments include portable Country X superannuation or portable veteran's pension or similar portable payments arising in Country X. Portable payments are those made by the Country X government to recipients living overseas. In your case, you are in receipt of a portable benefit paid by the Country X government. Therefore, Australia has the right to tax your benefit under the convention between Australia and Country X. As there are no inconsistencies between the ITAA 1936 and the Agreements Act, section 27H of the ITAA 1936 will apply in the usual way to include your benefit in your assessable income. Your Country X government invalid’s benefit is assessable (taxable) income for Australian income tax purposes.