Private ruling: International income
Date of advice: 13 December 2023
Published: 5 February 2024
Ruling period: Year ended 30 June XXX
Date scheme commenced: 1 July XXX

Ruling: Q1: Are the payments you receive from the XXX assessable in Australia under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: You worked for approximately XXX years for the XXX and received XXX Social Security. You later worked for approximately XXX years for the XXX which provides a XXX pension. The XXX provides retirement, disability and survivor benefits for XXX prekindergarten through community college educators and their families. XXX is the largest educator-only pension fund in the world, and the second largest pension fund in the XXX. You receive approximately XXX per month from your XXX pension. Your Social Security income is not subject to tax in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5 | 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. Assessable income consists of ordinary income and statutory income provided it is neither exempt nor non-assessable non-exempt income. Taxation Determination (TD) 93/151 Income tax: are periodic workers' compensation payments made by Comcare, 'pensions' for purposes of the pensions articles in Australia's double taxation agreements (DTAs)? refers to the term 'pension' not being defined in any of the Double Tax Agreements (DTA) and therefore takes the meaning it has under domestic law. A pension is defined in the Macquarie Dictionary as 'a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc'. TD 93/151 also refers to the conclusion of Hill J. in Tubemakers of Australia Ltd v. FC of T (1993) 25 ATR 183; 93 ATC 4207 that the essential characteristic of a pension is only that there be periodical payments. 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 DTA. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the 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 XXX is listed in section 5 of the Agreements Act. The agreement between Australia and the XXX operates to avoid the double taxation of income received by residents of Australia and the XXX. Taxation Ruling - Income Tax 2542- Income tax: taxation position of XXX non-government pensions further states: 'Except for government-service pensions to which Article 19 of the Convention applies, paragraph (1) of Article 18 provides that a pension paid in consideration of past employment shall be taxable only in the country of residence of the recipient'. Consequently, as you are a resident of Australia for taxation purposes, the pension payment you receive from XXX will be assessable only in in Australia under subsection 6-5(2) of the ITAA 1997 and must be declared in your Australian income tax return.