Private ruling: Foreign Country Government pension
Date of advice: 4 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Is your Foreign Country Government retirement pension assessable in Australia? | A1: No

Relevant facts and circumstances: You are a citizen of the Foreign Country A. You are retired from the Foreign Country A Government after many years' service. You moved to Australia. You are an Australian resident for taxation purposes. You receive a monthly Foreign Country A Government retirement pension. The pension is taxed in the Foreign Country A.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In your case, you are a resident of Australia in receipt of a Foreign Country A Government retirement pension. Under subsection 6-5(2) of the ITAA 1997 this income would ordinarily be taxable in Australia. In determining liability to tax on the foreign sourced income you received it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreement Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the Foreign Country A (the Foreign Country A Convention). The Foreign Country A Convention is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Foreign Country A Convention operates to avoid the double taxation of income received by Australian and Foreign Country A residents. Article 19 of the Foreign Country A Convention provides that wages, salaries and similar remuneration, including pensions, paid from funds of the Foreign Country A for labour or personal services performed as an employee in the discharge of governmental functions of the Foreign Country A shall be exempt from tax in Australia. Therefore the monthly Foreign Country A Government pension you receive for your past services is exempt income and not assessable in Australia.