ATO Interpretative Decision

ATO ID 2002/546

Income Tax

• This ATO ID was amended by replacing the reference to article 19 to the tax treaty between Australian and New Zealand with Article 18 contained in the new tax treaty which took effect from 19 March 2010.
  This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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 document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is an Australian resident taxpayer's New Zealand (NZ) sourced government superannuation pension assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. An Australian resident taxpayer's NZ sourced government superannuation pension is assessable under section 27H of the ITAA 1936.

Facts

The taxpayer is an Australian resident for taxation purposes.

The taxpayer is retired and receives a NZ government superannuation pension.

Reasons for Decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).

Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign scheme for the payment of superannuation benefits are included in assessable income.

In determining liability to Australian tax on foreign sourced income received by a 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 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Schedule 4 to the Agreements Act contains the double tax convention between Australia and NZ (NZ Convention). The NZ Convention operates to avoid the double taxation of income received by Australian and NZ residents.

Article 18 of the NZ Convention deals with pensions and provides that a pension paid to a resident of Australia shall be taxable only in Australia.

Therefore the taxpayer's NZ government superannuation pension is assessable under section 27H of the ITAA 1936.

Year of income:  Year ending 30 June 2002 Year ending 30 June 2003

Legislative References:
Income Tax Assessment Act 1936
   section 27H

Keywords
Foreign pension income
Double tax agreements
Foreign income
New Zealand

Business Line:  Small Business/Individual Taxpayers

Date of publication:  31 May 2002

ISSN: 1445-2782