ATO Interpretative Decision
ATO ID 2007/24
Income Tax
Assessability of an Australian sourced eligible termination payment paid to a Singaporean 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxpayer, a Singaporean resident, assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) on an eligible termination payment (ETP) received from a complying Australian superannuation fund?
Decision
Yes. The taxpayer, a Singaporean resident, is assessable under subsection 6-10(5) of the ITAA 1997 on an ETP received from a complying Australian superannuation fund.
Facts
The taxpayer is a Singaporean resident and is not an Australian resident for income tax purposes.
The taxpayer received an ETP, as defined in paragraph 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936), from a complying Australian superannuation fund. The ETP consisted of both a concessional component and a post-June 1983 taxed element.
Reasons for Decision
Paragraph 27B(1)(a) and subsection 27C(2) of the ITAA 1936 include the post-June 1983 taxed element and the concessional component respectively in the assessable income of a taxpayer.
The assessable income of a non-resident, however, only includes the statutory income from Australian sources (subsection 6-10(5) of the ITAA 1997).
A non-resident's assessable income will therefore only include the post-June 1983 taxed element and the concessional component where the ETP has an Australian source.
The ETP was paid by a superannuation fund that was established and controlled in Australia and so has an Australian source (paragraph 45 of Taxation Ruling IT 2168). It will form part of the non-resident's assessable income.
In determining liability to tax on Australian source 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).
The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that treaty contained in Schedule 5 and 5A of the Agreements Act respectively must be considered in determining whether the ETP paid to the taxpayer is taxable in Australia.
Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one.
Article 11 of the Singapore Agreement deals with remuneration in respect of personal services. It does not apply to amounts paid by a complying superannuation fund that constitute an ETP under paragraph 27A(1)(b) of the ITAA 1936 because such amounts are not remuneration paid in respect of personal services.
Article 13 of the Singapore Agreement deals with pensions and annuities. It does not apply because an ETP is not a periodic payment that attracts the application of Article 13.
Article 16A of the Singapore Agreement provides that items of income which are not expressly mentioned in the foregoing Articles of the Singapore Agreement shall be taxable in accordance with the laws of the Contracting State. As the ETP is not dealt with by the other Articles of the tax treaty, Article 16A provides that the amount is taxable in Australia in accordance with Australian law.
Accordingly, the ETP will be assessable in Australia.
Date of decision: 11 December 2006Year of income: Year ended 30 June 2006
Legislative References:
Income Tax Assessment Act 1936
paragraph 27A(1)
paragraph 27B(1)(a)
subsection 27C(2)
subsection 6-5(3)
subsection 6-10(5)
section 10-5 International Tax Agreements Act 1953
section 4
subsection 4(1)
section 7
schedule 5
Schedule 5, Article 11
Schedule 5, Article 13
Schedule 5, Article 16A
Schedule 5A
Related Public Rulings (including Determinations)
Taxation Ruling IT 2168
ATO ID 2002/304
ATO ID 2002/638
ATO ID 2003/681
ATO ID 2003/1155
Keywords
Double tax agreements
ETP concessional component
ETP post June 1983 component
Income tax
International CoE
International tax
Singapore
Superannuation funds
ISSN: 1445-2782