ATO Interpretative Decision
ATO ID 2007/21
Income Tax
Assessability of an Australian state government pension received by a Sri Lankan 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an Australian government pension received by a Sri Lankan resident assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. An Australian government pension received by a Sri Lankan resident is not assessable under subsection 6-10(5) of the ITAA 1997.
Facts
The taxpayer is a Sri Lankan resident and is not an Australian resident.
The taxpayer received a state government pension in respect of services rendered in connection with a business carried on by the government in Australia.
Reasons for Decision
Subsection 6-10(5) of the ITAA 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) includes annuities and superannuation pensions as assessable income.
In determining liability to tax on Australian sourced income received by a non resident, it is necessary to also consider any applicable tax treaty 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 double tax agreement between Australia and Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement).
Article 19 of the Sri Lankan Agreement deals with government service pensions. Article 19(3) of the Sri Lankan Agreement provides that Article 18 of the Sri Lankan Agreement applies where the government pension in respect of services rendered in connection with a business carried on by a local authority of Australia.
The state government pension received by the taxpayer is in respect of services rendered in connection with a business carried on by the state government, a local authority of Australia. Accordingly, Article 18 of the Sri Lankan Agreement will apply.
Article 18(1) of the Sri Lankan Agreement provides that pensions paid to a Sri Lankan resident is taxable only in Sri Lanka.
The taxpayer is a resident of Sri Lanka and is not an Australian resident. Accordingly, the Australian state government pension will be taxable only in Sri Lanka.
Date of decision: 4 January 2007Year of income: Year ended 30 June 2005 Year ended 30 June 2006
Legislative References:
Income Tax Assessment Act 1936
section 27H
section 6-10 International Tax Agreements Act 1953
section 4
Schedule 31 Article 18
Schedule 31 Article 19
Keywords
International CoE
Non resident individuals
Non resident interest withholding tax
Sri Lanka
ISSN: 1445-2782