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Edited version of your private ruling
Authorisation Number: 1012293818547
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Ruling
Subject: Assessability of foreign sourced pension
Questions and answer:
Is the disability support pension that you receive from country X assessable in Australia?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts
You are an Australian resident for income tax purposes.
You have a chronic illness that has rendered you unable to work.
As a result of your illness you are in receipt of a disability support pension from country X.
The pension is paid on a monthly basis.
You do not pay any tax to the country X government in relation to the disability support pension that you receive.
In addition to the pension that you receive from the country X you also receive a disability support (invalidity) pension from Centrelink.
You have argued that the Country X disability support pension is equivalent to the invalidity pension in Australia, which is not assessable as long as the recipients are under pension age.
Relevant legislative provisions
Subsection 6-5(2) of the Income Tax Assessment Act 1997
Section 770-10 of the Income Tax Assessment Act 1997
Section 770-130 of the Income Tax Assessment Act 1997
Section 4 of the International Tax Agreements Act 1953
Schedule A, Article B of the 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 a resident taxpayer includes the ordinary income derived from all sources, whether in or out of Australia, during the income year.
A pension is ordinary income and therefore assessable for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The country X Agreement is listed in section 5 of the Agreements Act. The country X agreement operates to avoid the double taxation of income received by residents of Australia and country X.
Country X pensions
Article B of the country X agreement provides that any pension derived from sources within country X by an individual who is a resident of Australia shall be exempt from tax in country X and fully assessable in Australia.
Therefore, the country X pension received by you is assessable only in Australia and forms part of your assessable income under section 6-5 of the ITAA 1997.
Your arguments
You have argued that the country X disability support pension is equivalent to the invalidity pension in Australia, which is not taxable as long as the recipients are under pension age.
There are specific provisions in the income tax law which exempt certain Australian Government pensions from tax. Those exempt pensions include:
· a disability support pension paid by Centrelink to a person who is under age pension age
· an invalidity service pension where the veteran is under age pension age.
However, these provisions only apply to Australian Government pensions. There are no provisions in the income tax law that exempt pensions of a similar nature paid by the government of an overseas country.
Conclusion
You are an Australian resident for taxation purposes and therefore the income that you derive from your Country X disability support pension is assessable in Australia under section 6-5(2) of the ITAA 1997.
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