Private ruling: Assessability of Australian sourced pension
Date of advice: 3 April 2017
Published: September 2017
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Is your Australian pension only taxed in Australia rather than in Country X? | A1: Yes. | Q2: Are you entitled to a foreign tax credit in Australia if it is taxable in Country X? | A2: Not applicable.

Relevant facts and circumstances: You are currently an Australian resident for taxation purposes. You are a citizen of Australia only. You will be immigrating to Country X and will become a foreign-resident for taxation purposes. You are in receipt of a defined benefits pension from the Australian Government.

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

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) explains that the assessable income of an Australian resident taxpayer includes their ordinary income derived directly or indirectly from within and outside Australia during the income year. Subsection 6-5(3) says that the assessable income of someone who is not a resident of Australia includes their ordinary income derived directly or indirectly from within Australia during the year. In determining your liability to pay tax in Australia it is necessary to consider not only the Australian domestic income tax laws but also any applicable double tax agreements (DTAs). 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 Income Tax Assessment Act 1997 (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). As you are aware, Australia has an agreement with Country X. The agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database and operates to avoid the double taxation of income received by residents of Australia and Country X. Article X of the agreement with Country X means the pension is only assessable in Australia In accordance with the DTA your superannuation pension is only taxable in Australia. | Detailed Reasoning - Foreign income tax offset: To qualify for a foreign income tax offset under section 770-10 of the ITAA 1997 you must have paid foreign income tax on an amount that is included in your Australian assessable income for that year. When you become a non-resident for taxation purposes and remain a citizen of Australia, your pension will be taxable in Australia and not in Country X; there will be no foreign tax paid and therefore no credit available to offset.