ATO Interpretative Decision

ATO ID 2004/126

Income Tax

Assessability of a Comsuper pension paid to Netherlands 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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade.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.

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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a Comsuper pension received by a resident of the Netherlands assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. A Comsuper pension received by a resident of the Netherlands is assessable under subsection 6-5(3) of the ITAA 1997.

Facts

The taxpayer is a resident of the Netherlands for tax purposes.

The taxpayer was an employee of the Australian government.

The taxpayer receives a superannuation pension from Comsuper in respect of their employment with the Australian government.

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 International Tax Agreements Act 1953 (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 10 to the Agreements Act contains the double tax agreement and protocol between Australia and the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreements Act contains the Second Protocol to the Netherlands Agreement (the Second Protocol). The Netherlands Agreement and the Second Protocol operate to avoid the double taxation of income received by residents of Australia and the Netherlands.

Article 19(1) of the Netherlands Agreement provides that remuneration, including a pension, paid to an individual in respect of services rendered in the discharge of governmental functions to Australia or to a political sub-division of Australia or to a local authority of Australia, may be taxed in Australia.

Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the country of residence of the taxpayer may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it.

As the taxpayer receives a pension in respect of services rendered in the discharge of governmental functions to Australia, the pension may be taxed in Australia and in the Netherlands.

Accordingly, the Comsuper pension received by the taxpayer will be assessable under subsection 6-5(3) of the ITAA 1997.

Note: Article 23(3) of the Netherlands Agreement provides that to avoid double taxation of residents of the Netherlands, the Netherlands shall allow as a deduction from the Netherlands tax so computed for such items of income, as may be taxed in both Australia and the Netherlands according to Article 19. Broadly, the amount of this deduction shall be the lesser of the Australian tax payable and the Netherlands tax payable.

Date of decision: 22 January 2004

Year of income: Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009

Legislative References:
Income Tax Assessment Act 1997
subsection 6-5(3)

International Tax Agreements Act 1953
   section 4
   Schedule 10
   Schedule 10, Article 19(1)
   Schedule 10, Article 23(3)
   Schedule 10A

Related Public Rulings (including Determinations)
Taxation Ruling TR 2001/13

Keywords
International tax
Netherlands
Superannuation pension income

Siebel/TDMS Reference Number: 3903929

Business Line: Public Groups and International

Date of publication: 6 February 2004

ISSN: 1445-2782

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