ATO Interpretative Decision
ATO ID 2002/202
Income Tax
Assessability of an Australian sourced pension paid to a resident of the United KingdomFOI status: may be released
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This ATOID provides you with the following level of protection:
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the taxpayer, a resident of the United Kingdom (UK), assessable on their Australian sourced pension under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The taxpayer, a resident of the UK, is not assessable on their Australian sourced pension under section 6-5 of the ITAA 1997.
Facts
The taxpayer is a resident of the UK and is a non resident for Australian tax purposes.
The taxpayer has retired and is in receipt of a superannuation pension from their employer.
The taxpayer pays income tax in the UK on this pension.
Reasons for Decision
Subsection 6-5 (3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non resident's assessable income under subsection 6-10(5) of the ITAA 1997.
Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income.
In determining liability to Australian tax on Australian sourced income received by a non resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Schedule 1 of the Agreements Act contains the double tax agreement between Australia and the UK (the UK Agreement). The UK Agreement operates to avoid the double taxation of income received by Australian and UK residents.
Article 14 of the UK Agreement deals with pensions and annuities. Paragraph (1) of the Article 14 provides that an Australian sourced pension paid to an individual who is a resident of the UK shall the exempt from tax in Australia.
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
As the taxpayer is a resident of the UK, the Australian sourced pension they receive will not be assessable under section 6-5 of the ITAA 1997.
Date of decision: 3 October 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
subsection 6-5(3)
subsection 6-10(5)
section 10-5
section 27H International Tax Agreements Act 1953
section 4
Schedule 1, Article 14
Schedule 1, Article 14(1) Related ATO Interpretative Decisions
ATO ID 2002/203
Keywords
Double tax agreements
Foreign pension income
Non resident individuals
Superannuation pension income
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 3 October 2001 | Original statement |
| 9 November 2007 | Archived |