Private ruling: DTA - foreign pension
Date of advice: 17 February 2026
Published: 7 April 2026
Ruling period: DD MM YY | DD MM YY | DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Is the pension you receive from Country Z in respect of your former government employment assessable income in Australia? | A1: No. 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. 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 (DTA). 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 Country Z Agreement is listed in section 5 of the Agreements Act and is called the Agreement between the Government of Australia and the Government of the Country Z for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Country Z Agreement). The Country Z Agreement operates to avoid the double taxation of income received by residents of Australia and Country Z. The Country Z Agreement states at Article 18: Subject to the provisions of paragraph (2) of Article 19, pensions paid to a resident of a Contracting State in consideration of past employment, and payments made to a resident of that State under the social security system of the other Contracting State, shall be taxable only in the first-mentioned State. Paragraph 2 of Article 19 states: (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or local authority of that State to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. (b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a citizen or national of, that other State. In your case, the pension you receive from Country Z is paid in respect of government service. As you are not an Australian citizen or national, Article 19 of the Australia-Country Z Double Tax Agreement applies. Under this Article, the pension is not assessable in Australia. Consequently, the amount is also not assessable under subsection 6-5(2) of the ITAA 1997.

Relevant facts and circumstances: On DD MM YY, you were granted a Subclass XXXX visa, which enabled you to migrate from Country Z to Australia. You have established your permanent home in Australia. On DD MM YY, you were granted a Subclass XXXX visa. You are a permanent resident of Australia, although you do not hold Australian citizenship. You are an Australian resident for tax purposes for the YEAR 1, YEAR 2, and YEAR 3 income years. You received a Country Z pension in each of the YEAR 1, YEAR 2, and YEAR 3 income years. Prior to retirement, you were employed as a XXXX in Country Z. You served in this role for XX years and X months, from DD MM YY to DD MM YY. Your Country Z employer was a state-run public institution administered by XXXX, and your role formed part of the Country Z Government's statutory public XXXX service. Your retirement income is assessed and paid through the local XXXX. You receive two components of retirement income from Country Z, both classified as "Government Service" payments under Country Z law: Component A - Basic Retirement Pension • Represents approximately XX% of your monthly income. • These payments are exempt from Country Z Individual Income Tax under XXXX. • These amounts appear in your bank statements. Component B - Occupational Annuity • Represents approximately X% of your monthly income. • This is a mandatory supplementary pension scheme for XXXX employees. • It is treated as taxable income in Country Z under XXXX. • Tax is normally withheld at the source by the trustee bank. • Your monthly annuity payment is XX. Assumptions You are an Australian resident for Country Z Agreement purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5(2) | International Tax Agreements Act 1953 section 4 | International Tax Agreements Act 1953 section 5 Agreement between the Government of Australia and the Government of Country Z for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income