ATO Interpretative Decision
ATO ID 2004/971
Income taxAssessability of Australian pension income derived by Spanish resident
FOI status: may be released
This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.
Status of this decision: Decision Current
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
Is the Australian sourced Public Sector Superannuation (PSS) Scheme pension income derived by a resident of Spain assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
No. Although the Australian sourced PSS Scheme pension paid to a resident of Spain is ordinarily assessable under subsection 6-5(3) of the ITAA 1997, Article 19(2)(b) of the Spanish Agreement contained in Schedule 39 of the International Tax Agreements Act 1953 (the Agreements Act) applies, and the pension is not taxable in Australia.
The taxpayer is a resident of Australia, but will move to Spain in the future to reside there on a permanent basis.
From the date of taxpayer's arrival in Spain (to live there permanently), the taxpayer will be a resident of Spain for taxation purposes.
The taxpayer is a citizen of Spain.
In Australia, the taxpayer was an employee of the Australian Public Service.
The taxpayer receives a pension from the Public Sector Superannuation (PSS) Scheme in respect of the taxpayer's employment with the Australian Public Service.
Reasons for Decision
Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.
Pensions 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 Agreements Act.
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.
Schedule 39 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Spain (the Spanish Agreement). The Spanish Agreement operates to avoid the double taxation of income derived by Australian and Spanish residents and also to prevent fiscal evasion with respect to taxes on income.
Paragraph (2) of Article 19 of the Spanish Agreement deals with Government Service pensions. Subparagraph (2)(a) of Article 19 states that a pension paid by Australia in respect of services rendered to Australia shall be taxable in Australia. This includes ComSuper pension payments, such as the PSS Scheme pension payments, to a person who was employed in the Australian Public Service. However, subparagraph (2)(b) of Article 19 provides that such pensions shall be taxable only in Spain if the individual is a resident of, and a citizen or national of, Spain.
Therefore, as a resident and citizen of Spain, the pension income derived by the taxpayer from the PSS Scheme in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.Date of decision: 24 November 2004
Year of income: Year ended 30 June 2005
Income Tax Assessment Act 1997
Schedule 39, Article 19(2)(b)
Double tax agreements