Private ruling: Lump sum payment
Date of advice: 16 September 2016
Published: November 2016
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the lump sum payment received from overseas assessable in Australia? Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You received a lump sum payment from an overseas pension scheme in the 2017 income year. The lump sum payment is not assessable in overseas.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | Income Tax Assessment Act 1997 Subsection 52-10(1A) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Schedule 1 Article 17

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 income 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 overseas Agreement is listed in section 5 of the Agreements Act. The agreement operates to avoid the double taxation of income received by residents of Australia and the overseas country. Article XX of the agreement provides that pensions paid to a resident of Australia shall be taxable only in Australia. An amount received as a lump sum representing a deferred pension is ordinary income and forms part of the assessable income of the taxpayer in the year of receipt. As you are a resident of Australia for taxation purposes the lump sum payment you receive is assessable income in Australia under subsection 6-5(2) of the ITAA 1997.