Private ruling: Foreign pension and interest income
Published: June 2013
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Questions and answers | 1. Is the foreign pension you receive assessable in Australia? | No. | 2. Is your foreign bank interest assessable in Australia? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You receive a pension from country X. You also receive a small amount of bank interest from country X.

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. Pension and interest income are both 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. 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. Your pension from country X is not assessable in Australia and so does not need to be included in your assessable income when completing your tax return. Another article of the country X agreement deals with interest income: Interest arising in one of the Contracting States, being interest to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. However, that interest may also be taxed in the Contracting State in which it arises, and according to the law of that State, but the tax so charged shall not exceed 10 percent of the gross amount of the interest. In your case, your bank interest is assessable in Australia and can also be assessable in country X.