ATO Interpretative Decision
ATO ID 2003/917 (Withdrawn)
Income Tax
Assessability of interest from UK treasury bondsFOI status: may be released
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This ATO ID is withdrawn from the database because it contains references to the tax treaty between Australia and the United Kingdom that was replaced with a new tax treaty effective from 17 December 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2003-04 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 8 February 2008
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 interest received by an Australian resident taxpayer from United Kingdom (UK) treasury bonds the taxpayer inherited, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The interest received by the Australian resident taxpayer from UK treasury bonds the taxpayer inherited is assessable income under subsection 6-5(2) of the ITAA 1997.
Facts
The taxpayer, an Australian resident, inherited UK Treasury Bonds under the terms of a will.
The bonds generate interest income paid twice a year in Sterling.
Withholding tax is not deducted when the interest is paid to the taxpayer.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that an Australian resident taxpayer's assessable income includes the ordinary income derived from all sources whether in or out of Australia, during the income year.
Interest is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
The taxpayer is a resident of Australia, receiving income from the UK, a country with whom Australia has entered a double taxation agreement. Therefore, the double taxation agreement between Australia and the UK (the UK Agreement) and the protocol to that agreement which are contained in Schedules 1 and 1A to the International Tax Agreements Act 1953 (the Agreements Act) must be considered in determining whether the interest paid to the taxpayer is taxable in Australia.
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
Article 9 of the UK Agreement deals with interest. However, that Article has no effect on the assessability or otherwise of the interest income from the UK treasury bonds received by the Australian resident taxpayer.
Accordingly, the interest received by the taxpayer from the UK treasury bonds is assessable under subsection 6-5(2) of the ITAA 1997.
Date of decision: 4 September 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
section 4
Schedule 1
Schedule 1, Article 9
Schedule 1A
Keywords
Double tax agreements
Foreign tax credits
Income bonds
Interest income
Non resident interest withholding tax
United Kingdom
ISSN: 1445-2782
| Date: | Version: | |
| 4 September 2003 | Original statement | |
| You are here → | 8 February 2008 | Archived |