ATO Interpretative Decision
ATO ID 2004/298
Income Tax
Assessability of an Australian government service pension received by a US resident who is an Australian 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 Australian government service pension received by a United States (US) resident taxpayer who is an Australian citizen, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The Australian government service pension received by the US resident taxpayer is assessable under subsection 6-5(3) of the ITAA 1997 as Australia has sole taxing rights over a government service pension paid to an Australian citizen who is a resident of the US.
Facts
The taxpayer is a non-resident of Australia for taxation purposes.
The taxpayer is a resident of the US for taxation purposes.
The taxpayer receives a government service pension from Comsuper.
The taxpayer is an Australian citizen.
The taxpayer is not currently a US citizen.
Reasons for Decision
Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes all ordinary income derived from all Australian sources.
Pension payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.
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 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.
Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents.
Article 18 of the US Convention specifically deals with the taxation of pensions and annuities income. This Article provides that, subject to Article 19 of the US Convention, the US has the sole taxing rights over pensions and annuities income paid to an individual who is a resident of the US.
Article 19 of the US Convention provides that wages, salaries and similar remuneration, including pensions, paid from the funds of the Australian government for labour or personal services performed as an employee in the discharge of governmental functions to an Australian citizen, shall be taxable only in Australia.
Therefore, the Comsuper pension that the taxpayer receives will be assessable under subsection 6-5(3) of the ITAA 1997.
Date of decision: 22 December 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(3)
Schedule 2
Schedule 2, Article 18
Schedule 2, Article 19
Schedule 2A
Keywords
Annuities & superannuation pensions
Allocated annuities and pensions
Foreign income
Double tax agreements
Residence in Australia
Residence of individuals
Non resident individuals
Resident/residency
Superannuation pension income
United States
ISSN: 1445-2782