Private ruling: Lump sum payment in arrears
Date of advice: 14 April 2016
Published: June 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and Answer | Do you include in your assessable income a lump sum amount from a foreign pension fund which was accrued prior to you becoming an Australian resident taxpayer? | Yes

Relevant facts and circumstances: You originally received a lump sum amount from your foreign pension fund in 200X. You became a resident of Australia in 20XX You are not on a temporary resident visa. A review of your pension entitlement, took place. The review concluded that an additional payment was due to you with an interest component.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997 | Section 4 of the International Tax Agreements Act 1953

Reasons for decision: Summary: Subsection 6-5(2) of the ITAA 1997 provides that 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. The pension income derived by the taxpayer from the overseas country is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997 in the year it was received. In determining liability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that the Acts are read as one. Article 17 of the Convention provides that pensions paid to a resident of Australia shall be taxable only in Australia. There, the lump sum pension amount you receive is included in your assessable income.