Private ruling: Assessability of foreign pension
Published: July 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: A1: Yes.

Relevant facts and circumstances: You are a resident of Australia for income tax purposes. You immigrated to Australia a number of years ago. Your nursing pension was preserved in the Country Y until you reached the age of 60. You were given a lump sum payment as well as a weekly pension. You have started to receive this 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 17

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. Country Y Agreement is listed in section 5 of the Agreements Act. The Country Y agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The agreement operates to avoid the double taxation of income received by residents of Australia and Country Y. Article 17 of the agreement provides that pensions paid to a resident of Australia shall be taxable only in Australia. An amount received as a lump sum representing a deferred pension is ordinary income and forms part of the assessable income of the taxpayer in the year of receipt. As you are a resident of Australia for taxation purposes both the pension and lump sum payment you receive is assessable income in Australia under subsection 6-5(2) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Question and answer: Is the Country Y pension and lump sum payment you receive assessable in Australia?