ATO Interpretative Decision
ATO ID 2003/178 (Withdrawn)
Income Tax
Assessability of arrears of pension received as a lump sum from the United KingdomFOI 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This ATO ID is withdrawn from the database because it contains references to the tax treaty between Australia and United Kingdom that was replaced with a new tax treaty (Schedule 1) which entered into force on 17 December 2003. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions up to, and including, 30 June 2004.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 arrears of pension from the United Kingdom (UK) received as a lump sum by a resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The arrears of pension from the UK received as a lump sum by a resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.
Facts
The taxpayer is a resident of Australia for income tax purposes.
The taxpayer received a lump sum payment from the UK.
The lump sum payment represents arrears of pension over a long period of time.
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, whether in or out of Australia, during the income year.
In determining liability to Australian tax on foreign sourced 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 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Schedule 1 to the Agreements Act contains the double tax agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the UK Agreement). The UK Agreement operates to avoid the double taxation of income received by Australian and UK residents.
Paragraph (1) of Article 14 of the UK Agreement provides that any pension derived from the UK by an Australian resident will be exempt from tax in the UK.
An amount received as a lump sum representing arrears of unpaid pension is ordinary income and forms part of the assessable of the taxpayer in the year of receipt.
Accordingly, the assessable income of the taxpayer will include the arrears of pension from the UK received as a lump sum under subsection 6-5(2) of the ITAA 1997.
Date of decision: 5 March 2003Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
section 4
Schedule 1, paragraph (1) of Article 14
Keywords
Double tax agreements
Foreign pension
International tax
Lump sum payment
United Kingdom
ISSN: 1445-2782
| Date: | Version: | |
| 5 March 2003 | Original statement | |
| You are here | 10 December 2010 | Archived |