Private ruling: Assessability of foreign pension
Published: November 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
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Is the pension received by you from overseas assessable income in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are a citizen of Australia. You are over the age of 65. You receive an overseas Government pension. Your deceased spouse formally received a Government pension.

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 19

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 overseas Agreement is listed in section 5 of the Agreements Act. The agreement between Australia and the overseas country operates to avoid the double taxation of income received by residents of Australia and the overseas country. Article XX of the agreement considers the tax treatment of governmental salaries, wages and other similar remunerations including pensions paid from funds of one of the Contracting States, of a state or other political subdivision thereof or of an agency or authority of any of the foregoing for labor or personal services performed as an employee of any of the above in the discharge of governmental functions to a citizen of that State shall be exempt from tax by the other Contracting State. Consequently your pension will be taxed in Australia under section 6-5 of the ITAA 1997 as according to article XX of the DTA between Australia and the overseas country Australia has the sole taxing rights as you are a citizen of Australia. This income must be included in your tax return. Please note: Similar Australian government payments paid to spouses who are over the pension age and whose partner has died paid under the Veterans Affairs Entitlements Act 1986 are assessable income and not exempt from tax in Australia.