Private ruling: Foreign pension
Published: December 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Questions and answers | 1. Is the Country X lump sum benefit you received assessable in Australia? | No.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You receive a Country X social security benefit. Your social security benefit ceased without explanation. You requested a review of this decision and received a lump sum payment. A letter stated that the payment was for money that had been incorrectly withheld back over several years. You commenced receiving your social security benefit again. This benefit is paid monthly to you.

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

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. Income from benefits 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 country X Agreement is listed in section 5 of the Agreements Act. The agreement between Australia and country X operates to avoid the double taxation of income received by residents of Australia and country X. An article of the country X agreement considers the tax treatment of pensions and annuities. The article states that social security payments and other public pensions paid by one of the contracting states to an individual who is a resident of the other contracting state or a citizen of country X shall be taxable only in the first mentioned state. Accordingly, your social security benefit (paid as a lump sum in arrears) is not assessable in Australia under an article of the country X Agreement and is not required to be declared in your Australian tax return.