ATO Interpretative Decision
ATO ID 2006/163
Income tax
Foreign source income: pensions - non-assessable non-exempt income and temporary residentsFOI status: may be released
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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can is the taxpayer, a temporary resident of Australia, who derived pension income from the United Kingdom (UK) which is non-assessable non exempt income under Australia's temporary residents measure, choose to have the pension income taxed in Australia?
Decision
No. The taxpayer, who is a temporary resident of Australia cannot choose to have pension income from the UK, which is non-assessable non-exempt income under Australia's temporary residents measure, taxed in Australia.
Facts
The taxpayer is a resident of Australia for the purposes of Australian tax.
The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).
The taxpayer derived pension income from the UK while the taxpayer was a temporary resident of Australia.
The taxpayer's UK sourced pension income is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that 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 derived by the taxpayer from the UK is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
Section 768-910 of the ITAA 1997 provides that foreign income, other than employment related income and capital gains on shares and rights acquired under employee share schemes, is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia. Accordingly, UK pension income is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia.
Subsection 6-15(3) of the ITAA 1997 provides that if an amount that is non-assessable non-exempt income, it is not assessable income. As such, the taxpayer's pension income from the UK is not assessable income.
Subdivision 768-R does not allow a person who is a temporary resident to make an election to have foreign source income, which is non-assessable non-exempt income, treated as assessable income for Australian tax purposes. Therefore, the taxpayer cannot choose to have their UK pension income, which is non-assessable non-exempt income, taxed in Australia.
Date of decision: 23 June 2006Year of income: 30 June 2007
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
Subdivision 768-R
section 768-910
subsection 995-1(1)
ATO ID 2006/161
ATO ID 2006/162
Keywords
Double tax agreements
Foreign pension income
International tax
Resident/residency
United Kingdom
Temporary resident
ISSN: 1445-2782