ATO Interpretative Decision
ATO ID 2001/382
Income Tax
Exempt Income: United States Social Security BenefitFOI 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 Social Security benefit received from the United States of America (USA) included in a taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No, a Social Security benefit received from the USA is not included in a taxpayer's assessable income under section 6-5 of the ITAA 1997.
Facts
The taxpayer is an Australian resident for income tax purposes.
The taxpayer receives a social security benefit from the USA.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operate to prevent the double taxation of income.
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
Paragraph 18(2) of Schedule 2 of the Agreements Act provides that Social Security payments by the USA to a resident of Australia shall only be taxed in the USA.
The Social Security benefit received by the taxpayer is therefore not assessable income under section 6-5 of the ITAA 1997, but is subject to tax in the USA.
Date of decision: 29 August 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
Section 4
Schedule 2 Article 18(2)
Schedule 2
Keywords
Foreign income
Foreign pension
Foreign pension income
Double tax agreements
Social security pensions and allowances
ISSN: 1445-2782