Private ruling: Assessibility of foreign worker's compensation injury payments
Date of advice: 5 December 2023
Published: 22 January 2024
Ruling period: Period ending 30 June 20XX | Period ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are weekly worker's compensation injury payments received from an Australian source and paid to a tax resident of Country A, assessable in Australia under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) ? | A1: No. In determining liability to Australian tax in respect of Australian sourced income received by a non-resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreement Act 1953 (the Agreements Act). Taxation Determination TD 93/151 refers to the dictionary definition of pension. The Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW defines 'pension' as 'a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc'. TD93/151 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. Article XX(X) of the Country A Convention provides that pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State. Therefore, pensions paid from Australia to an individual who is a resident of the Country A shall be taxable only in the Country A.

Relevant facts and circumstances: You had a psychological injury at work and have been receiving workers' compensation since DD MM 20YY. Your condition is deemed Permanent and any future improvement to your health will be limited and work capacity will never be the same again. Your workers' compensation payments have continued and will continue to be paid for the foreseeable future. You left Australia on DD MM 20YY to travel to Country A to live with your parent due to their declining health. You have no plans returning to Australia and your Accountant has advised that you are a tax resident of Country A only. You owe a substantial amount on your Country A tax return which is due by MM 20YY. You have no family in Australia, all your family lives in Country A. You have no Properties in Australia. You ended your rental lease in Australia before moving to Country A.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | International Tax Agreements Act 1953