ATO Interpretative Decision
ATO ID 2002/287
Superannuation
Superannuation, retirement and employment termination: Eligible termination payments (Invalidity payments and overseas pensions)FOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 monthly pension which the taxpayer receives from an overseas pension fund exempt from tax pursuant to section 27CB of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. The exemption under section 27CB of the ITAA 1936 applies to certain eligible termination payments (ETPs). In this case, the taxpayer is receiving a pension not an ETP. Therefore, the exemption does not apply.
Facts
The taxpayer's employment was terminated prematurely because of incapacity to work.
The taxpayer was granted a pension for an indefinite duration from an overseas pension fund due to the incapacity.
The taxpayer receives monthly pension payments from the overseas pension fund.
Reasons for Decision
Subsection 27CB(1) of the ITAA 1936 states that if an ETP is made in relation to a taxpayer on or after 1 July 1994, and it includes an exempt amount such as a post June 1994 invalidity component, the taxpayer's assessable income does not include the exempt amount.
Subsection 27A(1) of the ITAA 1936 defines 'post-June 1994 invalidity component' as:
'in relation to an ETP, means so much of the ETP as consists of, or is attributable to, an invalidity payment made on or after 1 July 1994'.
'Invalidity payment' is defined in subsection 27A(1) of the ITAA 1936 as:
'in relation to a taxpayer, means an invalidity payment in relation to the taxpayer ascertained under section 27G'.
Section 27G of the ITAA 1936 states:
'Where -
The above demonstrates the initial requirement for section 27G of the ITAA 1936 to apply is for a taxpayer to receive an ETP. Subsection 27A(1) of the ITAA 1936 contains an exhaustive definition of 'eligible termination payment'. A pension payment does not fall within the definition of an ETP.
Therefore, section 27G of the ITAA 1936 does not apply to the pension payments and the exemption under section 27CB of the ITAA 1936 is not applicable.
Date of decision: 21 November 2001Year of income: Year ended 30 June 1997 Year ended 30 June 1999 Year ended 30 June 1998
Legislative References:
Income Tax Assessment Act 1936
Subsection 27A(1)
Section 27CB
Section 27G
Keywords
ETP post June 1994 invalidity component
ETP invalidity payments
Eligible termination payments
Annuities & superannuation pensions
Foreign pension
ISSN: 1445-2782
| Date: | Version: | |
| You are here → | 21 November 2001 | Original statement |
| 16 April 2010 | Archived |