ATO Interpretative Decision
ATO ID 2006/22
Income Tax
Assessability of Czech Republic pension received by Australian residentFOI 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 Czech Republic government pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A Czech Republic government pension received by an Australian 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 receives a government pension from the Czech Republic.
The pension is a social security pension paid by the Czech Republic government.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on foreign sourced income received by an Australian 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 (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 for some limited situations).
Schedule 40 to the Agreements Act contains the double tax agreement between Australia and the Czech Republic (The Czech Agreement). The Czech Agreement operates to avoid the double taxation of income received by Australian and Czech residents.
Article 18(1) of the Czech Agreement provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia.
Accordingly, as the taxpayer is a resident of Australia, the Czech Republic government pension is assessable under subsection 6-5(2) of the ITAA 1997.
Date of decision: 22 December 2005Year of income: Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009
Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(2)
section 4
Schedule 40
Schedule 40, Article 18, paragraph (1)
Keywords
Czech Republic
Double tax agreements
Foreign pension income
International tax
Treaties
ISSN: 1445-2782