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Edited version of private ruling
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Ruling
Subject: Foreign income - pension
Is the country X age pension and veteran affairs compensation payment assessable in Australia?
No.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are an Australian resident for taxation purposes.
You receive a monthly age pension from the country X Social Security.
You also receive a monthly compensation payment from the country X Department of Veterans Affairs.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
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 during the income year. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operate to prevent the double taxation of income.
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
A paragraph of a schedule of the Agreements Act provides that Social Security payments by the country X to a resident of Australia shall only be taxed in country X.
Therefore, the country X age pension and the veteran affairs compensation payment received by you is not assessable income under section 6-5 of the ITAA 1997, but is subject to tax in country X.
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