ATO Interpretative Decision
ATO ID 2002/317 (Withdrawn)
Income Tax
Assessability of a foreign government pension - redirected at the taxpayer's direction to a non resident - no Double Tax Agreement applies.FOI status: may be released
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This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found at subsections 6-5(2); 6-5(4); and 6-10(3) of the Income Tax Assessment Act 1997.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 the taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) on a foreign government pension which they are entitled to receive, but which they have directed be paid to a non resident?
Decision
Yes. The taxpayer is assessable on the foreign government pension under section 6-5(2) of the ITAA, notwithstanding that they have directed that the amount be paid to a non resident. Under subsection 6-5(4) of the ITAA 1997 the pension is considered to be received by the taxpayer as soon as it has been applied as directed by the taxpayer.
Facts
The taxpayer was born overseas and is currently an Australian resident.
The taxpayer was granted a pension by the government of a foreign country. The pension was payable as a result of the death of the taxpayer's relative during a time of political violence in the foreign country.
The pension is paid in regular monthly amounts. The taxpayer has directed that the payments be made to a resident of the foreign country on the taxpayer's behalf.
The person to whom the payments are made is a not a resident of Australia for tax purposes.
There is no double tax agreement between Australia and the foreign country.
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.
Subsection 6-5(4) of the ITAA 1997 provides that a taxpayer is taken to have received, and therefore derived, an amount of ordinary income as soon as it is dealt with on their behalf and as directed by them.
The foreign government pension is 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). However there is no applicable double tax agreement and therefore the income tax laws will govern the assessability of this pension.
The taxpayer was entitled to receive the pension but has directed that it be paid to a non resident. The foreign government has dealt with this pension on the taxpayer's behalf and paid it to the specified non resident.
Under subsection 6-5(4) of the ITAA 1997 the taxpayer is taken to have received, and therefore derived, the pension. The pension will therefore be included in their assessable income under subsection 6-5(2) of the ITAA 1997.
Date of decision: 24 October 2001Year of income: Year ended 30 June 1999 Year ended 30 June 2000
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
subsection 6-5(4)
Subsection 160AF(1) International Tax Agreements Act 1953
International Tax Agreements Act 1953
Related Public Rulings (including Determinations)
IT 2437
Keywords
Foreign pension income
Exempt income
Double tax agreements
Derived
ISSN: 1445-2782
| Date: | Version: | |
| 24 October 2001 | Original statement | |
| You are here | 19 December 2018 | Archived |