Private ruling: Residency
Date of advice: 10 October 2016
Published: February 2017
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Is the payment you receive from Country Y assessable in Australia? | No.

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 a resident of Australia for taxation purposes. You are a citizen of Country Y. You receive a payment from the Country Y Government.

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 19

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 relevant Agreement (X agreement) is listed in section 5 of the Agreements Act. The agreement between Australia and Country Y operates to avoid the double taxation of income received by residents of Australia and Country Y. Article XX of the Country Y agreement considers the tax treatment of governmental salaries, wages and other similar remunerations including pensions paid from funds of one of the Contracting States, of a state or other political subdivision thereof or of an agency or authority of any of the foregoing for labor or personal services performed as an employee of any of the above in the discharge of governmental functions to a citizen of that State shall be exempt from tax by the other Contracting State. Your payment is not assessable in Australia under Article XX of the DTA between Australia and Country Y as you are a citizen of Country Y. Consequently you are not required to declare the payment in your Australian tax return. | Detailed Reasoning - Please note:: Similar Australian government payments paid to spouses who are over the pension age and whose partner has died paid under the Veterans Affairs Entitlements Act 1986 are assessable income and not exempt from tax in Australia.