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Edited version of private ruling
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Ruling
Subject: Foreign pension
Is the foreign pension assessable in Australia?
No.
This ruling applies for the following period
Year ending 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You are an Australian resident for taxation purposes.
You are foreign citizen.
You are in receipt of a foreign Pension.
Australia has a tax treaty with the foreign country.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
International Tax Agreements Act 1953
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
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 tax treaty 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.
The relevant schedule to the Agreements Act contains the tax treaty between Australia and the foreign country. The tax treaty operates to avoid double taxation of income received by Australian and foreign residents.
The relevant article X of the tax treaty provides that subject to the provisions of another article, pensions paid to an individual who is a resident of Australia in consideration of past employment shall be taxable only in Australia.
The relevant article Y of the tax treaty defines 'pensions' as periodic payments made by reasons of retirement or death, in consideration for services rendered or by way of compensation paid after retirement for injuries received in connection with past employment.
The pension received by the taxpayer from the foreign country government comes within the definition of a 'pension' under particular paragraph of the relevant article of the tax treaty.
The other article of the tax treaty provides that pensions paid from funds of the foreign country for labour or personal services performed as an employee in the discharge of governmental functions to a citizen of the foreign country shall be exempt from tax in Australia.
Accordingly, your foreign pension is not assessable in Australia.
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