Private ruling: Country X's disability compensation payment
Date of advice: 30 November 2016
Published: April 2017
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Q1: Is your Country X's disability compensation payment assessable in Australia? | A1: No

Relevant facts and circumstances: You are a citizen of Australia. You are a citizen of Country X. You are a resident of Australia for income tax purposes. You were employed by the government of Country X. You sustained injuries during your service. You receive a monthly compensation payment from the Country X's government for your service-connected disability. The benefit is not subject to tax in Country X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident for income tax purposes includes ordinary income derived directly or indirectly from all sources during the income year. 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. Australia has signed a double tax agreement with country X. An article in the agreement provides that wages, salaries and similar remuneration, including pensions, paid to a citizen of country X from funds of country X for labour or personal services performed as an employee in the discharge of governmental functions of country X shall be exempt from tax in Australia. In your case, you are a citizen of Country X. You are a resident of Australia for income tax purposes. You receive a monthly compensation payment from the Country X's government for your service-connected disability. The benefit is not subject to tax in Country X. Therefore, the disability compensation payment you receive for your past services to the Country X's government is not assessable in Australia.