Private ruling: Foreign pension
Date of advice: 27 October 2025
Published: 15 December 2025
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the pension you receive from X assessable as income for Australian tax purposes? | A1: Yes.

Relevant facts and circumstances: You are an Australia resident for tax purposes. You are an Australian Citizen. From XX 20XX to XX 20XX, you were employed overseas by X agencies. You are now retired and receive a X pension. During your employment with the X, you were classified as an Australian citizen and the Staff Assessment deductions from your X payroll were applied towards reducing the Australian Government assessed contribution to the common X budget. Your X pension was derived from your employment with Company A and Company B, both recipients of the official Australian development assistance and you have stated that you were directly involved in the delivery of programmatic outcomes of these X bodies. You have been declaring the X pension in your Australian tax return and paying tax on it at marginal tax rates. You supplied the following documents: • Extracts from the 20XX to 20XX and 20XX to 20XX Australian official development assistance budgets, showing Company A and Company B as the recipients of the Australian official development assistance funds. Subsequent and preceding official Australian federal government documents show both Company A and Company B as receiving such funds during the period of tour employment with these agencies. • You were originally engaged by Company C in XX 20XX and subcontracted to Company A as Role A with the XX Programme in Location A. You were responsible for the development of the IT strategy for the XX and associated system architecture including criminal systems and relevant capacity development. • From XX 20XX to XX 20XX, you transitioned to be fully employed, in the same Role A capacity, by Company A. In XX 20XX, you commenced working for Company B. This and subsequent service with Company B made you eligible to receive the pension from XX which has a minimum 5 year service qualifying period. • During your time with Company A, you continued your involvement in the development delivery role. • In XX 20XX, you commenced working for Company B in the Company B Regional Office in Location B Xtil your retirement in XX 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-20 | Income Tax Assessment Act 1936 section 23AG | Income Tax Assessment Act 1936 subsection 23AG(1) | Income Tax Assessment Act 1936 subsection 23AG(7) | Income Tax Assessment Act 1936 subsection 23AG(1AA) | International Organisations (Privileges and Immunities) Act 1963

Reasons for decision: Detailed Reasoning - Assessable income - general: The assessable income of an individual who is a resident of Australia for taxation purposes will generally include all the income they earn from all sources, in or out of Australia. However, as per section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997) a provision of Australia's tax law or of another Commonwealth law might apply to provide an exemption from taxation on income such as salary and wages earned from certain types of employment. In cases where an individual is employed overseas on foreign service, section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) may provide an exemption from taxation in Australia on the salary and wages earned from that foreign service. In cases where an individual's foreign service relates to employment with or contracted work for an international organisation, an exemption from taxation may also be provided by the provisions of the International Organisations (Privileges and Immunities) Act 1963 (IOPI Act). | Detailed Reasoning - Exempt income under section 23AG of the ITAA 1936: Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings of an Australian resident derived during a continuous period of foreign service of not less than 91 days employment in a foreign country are exempt from income tax in Australia. Foreign earnings includes income consisting of salary, wages, bonuses or allowances (subsection 23AG(7) of the ITAA 1936). Subsection 23AG(1AA) of the ITAA 1936 provides that foreign earnings are not exempt from tax unless the continuous period of foreign service is directly attributable to any of the following: a) the delivery of Australia's overseas aid program by the individual's employer (except if that employer is an Australian Government Agency); b) the activities of the individual's employer in operating a public fund that: I. is covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the ITAA 1997 (international affairs deductible gift recipients): and II. meets the special conditions mentioned in that item. c) the activities of the individual's employer being a prescribed institution that is exempt from Australian tax (because of paragraphs 50-50 (c) or (d) of the ITAA 1997); or d) the individual's deployment outside Australia as a member of a disciplined force. e) an activity of a kind specified in the regulations. In your case, you do not meet any of the conditions of subsection 23AG(1AA) of the ITAA 1936, as the income you have received is a pension and not directly attributable to being engaged in foreign service employment, rather it is derived from the cessation of such employment. | Detailed Reasoning - Exemption from taxation under the provisions of the IOPI Act: The IOPI Act is a Commonwealth law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax. | Detailed Reasoning - Persons formerly connected with an international organisation: The Taxation Ruling TR 2025/1 Income tax: exempt income of international organisations and persons connected with them (TR 2025/1) provides the Commissioner's view with respect to the assessable nature of pension payments. 52. There are no taxation exemptions for persons who were formerly connected with an international organisation. 53. The IOPI Act and the regulations distinguish between persons currently connected with an international organisation and those who have stopped or ceased being connected. The privileges and immunities differ depending on this status. Part I of each of the Second to Fifth Schedules to the IOPI Act (that provide privileges concerning taxation) only apply to persons currently connected with an international organisation. Part II of each of those Schedules that apply to persons formerly connected with international organisations does not provide any privileges concerning taxation. 54. This distinction is consistent with the purpose of the IOPI Act to confer privileges and immunities to assist organisations to perform their functions, rather than to personally benefit persons connected with the organisation. The latter occurs if a person was provided an exemption from taxation for amounts they received after their connection with an international organisation ceased (even if that amount was a consequence of that earlier connection, for example, an employment termination payment or a pension). 55. Therefore, section 6-20 of the ITAA 1997 does not apply to the income of a person formerly connected with an international organisation as the IOPI Act does not confer any taxation exemptions upon such a person. | Detailed Reasoning - Pensions of former office holders: 56. A pension received by a former office holder in an international organisation is not exempted from tax in Australia. This is because the IOPI Act does not extend tax exemptions to persons formerly connected with an international organisation. 57. For income of an office holder to be exempted by the IOPI Act, the income must be received: • as a salary or emolument • while the person is an officer of an international organisation, and • from the relevant international organisation itself (rather than from a retirement or superannuation fund). 58. Pension payments do not generally satisfy these conditions as they are not received by a person while they are an office holder, nor are they paid by an international organisation. Further, a pension cannot be an emolument because it does not flow from the occupation of an office; it flows only on and from ceasing that office.

Question: Is the pension you receive from X assessable for Australian tax purposes?