ATO Interpretative Decision
ATO ID 2003/45 (Withdrawn)
International tax
Assessability of an Australian sourced pension paid to a resident of The PhilippinesFOI status: may be released
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This ATO ID contains a view in respect of section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). Section 27H of the ITAA 1936 has been amended for the 2007-08 income year and later income years. This ATO ID is withdrawn as it does not reflect the amendments made to section 27H of the ITAA 1936. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-07 income year.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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's Australian sourced pension assessable in Australia under subsection 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The taxpayer's Australian sourced pension is not assessable in Australia under subsection 6-5(3) of the ITAA 1997 because of the operation of Article 18 of Schedule 14 to the International Tax Agreements Act 1953 (the Agreements Act).
Facts
The taxpayer is a resident of The Philippines and is a non-resident of Australia for tax purposes.
The taxpayer receives a pension from Australia.
Reasons for Decision
Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non-resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non resident's assessable income under subsection 6-10(5) 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 Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income.
In determining liability to Australian tax on Australian sourced income received by a non resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the 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. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
Schedule 14 of the Agreements Act contains the double tax agreement between Australia and The Philippines (the Philippine Agreement). The Philippine Agreement operates to avoid the double taxation of income received by Australian and Philippine residents.
Article 18 of the Philippine Agreement deals with pensions and annuities. Paragraph (1) of Article 18 provides that an Australian sourced pension paid to an individual who is a resident of The Philippines shall be exempt from tax in Australia.
As the taxpayer is a resident of The Philippines, the Australian sourced pension they receive will not be assessable under section 6-5 of the ITAA 1997.
Date of decision: 21 November 2002Year of income: Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002 Year ending 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(3)
subsection 6-10(5)
section 27H International Tax Agreements Act 1953
section 4
Schedule 14
Schedule 14, Article 18
Schedule 14, paragraph (1) of Article 18
Keywords
Residence of individuals
Domicile tests
Non resident individuals
Resident/residency
Statutory test
Assessable income test
Residents departing Australia
ISSN: 1445-2782
| Date: | Version: | |
| 21 November 2002 | Original statement | |
| You are here | 9 November 2007 | Archived |