ATO Interpretative Decision

ATO ID 2004/547 (Withdrawn)

Income Tax

• This ATO ID contains a view in respect of section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). Section 27H of the ITAA 1936 has been amended for the 2007-08 income year and later income years. This ATO ID is withdrawn as it does not reflect the amendments made to section 27H of the ITAA 1936. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-07 income year.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a government pension received by an Australian resident taxpayer from the UK assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. The government pension received by an Australian resident taxpayer from the UK is assessable under section 27H of the ITAA 1936.

Facts

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer receives a retirement pension from the UK Government.

Reasons for Decision

Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes statutory income amounts which 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 the provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and superannuation pensions are included in assessable income.

In determining liability to Australian tax of 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 (the 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.

Schedule 1 to the Agreements Act contains the double tax agreement between Australia and the United Kingdom of Great Britain and Northern Ireland and the Notes to the agreement (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents.

The 2003 UK Convention entered into force on 17 December 2003, and in the case of Australia, applies to income or gains for the income year beginning on 1 July 2004 and thereafter.

Article 17(1) of the 2003 UK Convention provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia.

Therefore, the UK pension received by the taxpayer is included in the taxpayer's assessable income under section 27H of the ITAA 1936, and forms part of the taxpayer's statutory income under subsection 6-10(4) of the ITAA 1997.

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 1936
   section 27H

Keywords
Double tax agreements
Foreign pension
Foreign pension income
International tax
United Kingdom

Business Line:  Public Groups and International

Date of publication:  9 July 2004

ISSN: 1445-2782