ATO Interpretative Decision
ATO ID 2002/243 (Withdrawn)
Income Tax
Assessability of German retirement pension received by an Australian residentFOI status: may be released
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This ATO ID has been withdrawn due to the legislation being repealed effective 1 July 2007. The ATO ID can be relied on prior to this date.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a German retirement pension paid to an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A German retirement pension paid to an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997 as it is ordinary income.
Facts
The taxpayer is a resident of Australia.
The taxpayer receives a retirement pension from the German government.
The pension is not a form of compensation for National Socialist (Nazi) persecution.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on foreign source income, 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).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
Schedule 9 to the Agreements Act contains the double tax agreement between Australia and the Federal Republic of Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents.
Article 18 of the German Agreement provides that pensions and annuities paid to residents of Australia are taxable only in Australia.
Paragraph 23(kc) and subparagraph 23(kca)(i) of the Income Tax Assessment Act 1936 (ITAA 1936) exempt from income tax any pensions or annuities that are paid as or by way of compensation by the Federal Republic of Germany relating to compensation for National Socialist persecution.
The taxpayer's German retirement pension was not paid in respect of National Socialist persecution and therefore is not exempt from tax under paragraph 23(kc) or subparagraph 23(kca)(i) of the ITAA 1936. As the taxpayer is an Australian resident for tax purposes, subsection 6-5(2) of the ITAA 1997 will include income from all sources, including the German retirement pension, in the assessable income of the taxpayer.
Date of decision: 18 February 2002
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
paragraph 23(kc)
subparagraph 23(kca)(i) International Tax Agreements Act 1953
Schedule 9
Schedule 9, Article 18
Keywords
Foreign pension income
Exempt Income
International Tax
Germany
ISSN: 1445-2782
| Date: | Version: | |
| 18 February 2002 | Original statement | |
| You are here | 23 November 2007 | Archived |