Private ruling: Foreign income - pension
Published: September 2011
Ruling period: · Year ended 30 June 2011 | · Year ended 30 June 2012 | · Year ending 30 June 2013 | · Year ending 30 June 2014
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the monthly pension you received from the Country X assessable in Australia? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an Australian citizen. You are also an Australian resident for taxation purposes. You worked in the University of Country X. You also worked for government department in Country X. With both jobs mentioned above, you contributed to the Country X State Pension. You are currently receiving a monthly pension from the country X. The pension relates to your service performed as an employee while working in the Country X. There is a tax treaty between Australia and the Country X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953 Section 3AAA | 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 an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension payments are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Australia has a tax treaty with Country X (the Country X Convention) which operates to avoid the double taxation of income received by residents of Australia and Country X. The Country X Convention specifically deals with the taxation of pensions and annuities income. An article provides that, subject to another article of the Country X Convention, Australia has the sole taxing rights over pensions and annuities income paid to an individual who is a resident of Australia. An article of the Country X Convention explains that remuneration, including pensions, paid from funds of the Country X for labour or personal services performed as an employee in the discharge of governmental functions to a citizen of the Country X shall be exempt from tax in Australia. The relevant documents and practices in relation to that article of the Country X Convention indicate that the Country X considers the phrase governmental function should be given a very narrow interpretation and that Australia has accepted this position for the purposes of the Country X Convention. This interpretation excludes non core government functions from being a governmental function for the purposes of this article of the Country X Convention. Paragraph 88 of Taxation Ruling TR 2005/8 provides that the term in discharge of governmental functions in the Country X is understood to encompass functions traditionally carried on by a government such as military, diplomatic service, tax administrators and activities that directly support the carrying out of those functions. It would not include functions that are commonly found in the private sector (e.g. education, health care and utilities). You were not engaged in the discharge of government function for the purposes of the article of the Country X Convention. As such, the pension you receive is not covered by the article of the Country X Convention. Instead, it would fall for consideration under the other article of the Country X Convention. Accordingly the monthly pension you received from the Country X is assessable 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.