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Edited version of private ruling
Authorisation Number: 1011579976245
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Ruling
Subject: Foreign income - pension
1. Is your country X pension assessable in Australia?
Yes.
2. Is the country X pension interest income you received assessable in Australia?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are a citizen of country X.
You are a permanent resident in Australia for taxation purposes.
You are in receipt of a monthly annuity from country X.
Payment of the annuity arose from annuities purchased on retirement contributions made to retirement funding over working career.
You also earned interest on bank deposits from country X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Assessment Act 1953 Section 4
Reasons for decision
Pension income
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to tax on Australian sourced income, 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 Income Tax Assessment Act 1936 (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).
A Schedule to the Agreements Act contains the tax treaty between Australia and country X (the country X Agreement). The country X Agreement operates to avoid the double taxation of income received by Australian and country X residents.
An article of the country X Agreement deals with pensions and annuities.
A paragraph of that article of the country X Agreement provides that a pension or annuity derived by an Australian resident from country X sources shall be exempt from tax in country X to the extent that such pension and annuities are included in taxable income in Australia.
In your case, you are an Australian resident for taxation purposes. Therefore, the country X pension you receive is included in your assessable income under subsection 6-5(2) of the ITAA 1997.
Interest income
Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
An article of the country X Agreement provides that interest income arising in country X, being interest to which a resident of Australia is beneficially entitled, may be taxed in Australia.
Therefore, the country X sourced interest income you received is assessable in Australia under subsection 6-5(2) of the ITAA 1997.
Note
Ruling restricted to four years
As tax legislation is subject to change, it is considered unreasonable to rule for more than four years in advance.
For this reason this ruling has been restricted to the period covered by the four financial years up to the year ended 30 June 2014. However, this does not mean that you are required to apply for a new ruling every four years. In the absence of any change to the legislation, the interpretation of the law as explained in this ruling will continue to apply.
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