ATO Interpretative Decision
ATO ID 2003/1028
Income Tax
Assessability of Sri Lankan government service pension: Australian resident and citizenFOI status: may be released
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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 Sri Lankan government service pension received by an Australian resident taxpayer who is an Australian citizen assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. A Sri Lankan government service pension received by an Australian resident taxpayer who is an Australian citizen is assessable under section 27H of the ITAA 1936.
Facts
The taxpayer is an Australian citizen and is also an Australian resident for income tax purposes.
The taxpayer receives a Sri Lankan government service pension for services rendered to the government.
Reasons for Decision
Subsection section 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income also includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10 (4) 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 ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign scheme for paying superannuation benefits are included in assessable income.
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 (Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one.
Schedule 31 to the Agreements Act contains the agreement between Australia and the Democratic Socialist Republic of Sri Lanka (Sri Lankan Agreement). The Sri Lankan Agreement operates to avoid the double taxation of income received by Australian and Sri Lankan residents.
Article 19 of the Sri Lankan Agreement deals with government service pensions. Subparagraph (2)(a) of Article 19 provides that any pension paid by Sri Lanka to an individual in respect of services rendered to Sri Lanka will be taxable only in Sri Lanka. However, subparagraph (2)(b) of Article 19 provides that a pension paid by Sri Lanka to an individual in respect of services rendered to Sri Lanka will be taxable only in Australia if the individual is a resident of, and a citizen or national of Australia.
The taxpayer is an Australian citizen and is also a resident of Australia for income tax purposes. Accordingly, the Sri Lankan government service pension forms part of the taxpayer's assessable income under section 27H of the ITAA 1936.
Date of decision: 18 February 2003Year of income: Year ending 30 June 2003
Legislative References:
Income Tax Assessment Act 1936
section 27H
subsection 6-5(2)
section 6-10
subsection 6-10(4)
section 10-5 International Tax Agreements Act 1953
section 4
Schedule 31
Schedule 31, Article 19
Schedule 31, Article 19, subparagraph (2)(a)
Schedule 31, Article 19, subparagraph (2)(b)
Keywords
Double tax agreements
Foreign pension income
Sri Lanka
ISSN: 1445-2782