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Edited version of your private ruling
Authorisation Number: 1012342916498
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Ruling
Subject: Assessability of an Australian pension
Questions and answers:
Is the pension received by you from a state government superannuation fund assessable in Australia for taxation purposes?
Yes.
Is a pension received from state government superannuation fund, paid by or out of funds created by, the Australian Government for the purposes of Article 18 of the Australian and Overseas Double Taxation Agreement?
Yes.
This ruling applies for the following period:
Year ended 30 June 2012.
The scheme commenced on:
1 July 2011.
Relevant facts:
You an Australian citizen residing overseas.
You are a non-resident for Australian taxation purposes.
You are a resident of Overseas for income taxation purposes.
You receive a pension from a state government superannuation fund.
You were advised by the Trustee of the fund that it is a defined benefit fund and that the fund is taxed fund and that contributions are received from the employer and compulsory member contributions are received as well in order to fund the pension.
For the 20XX and 20YY financial years that pension included only taxable components being a taxed element and tax free component. No amount was untaxed.
You received a relevant PAYG Payment Summary - Superannuation Income Stream for each year.
You were previously employed by the sate government in Australia.
You were a member of the state government superannuation fund which is a taxed fund, and received both Compulsory Member contributions and employer contributions on your behalf.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(3).
Agreement between the Government of Australia and the Government of Overseas for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income. Articles 17 and 18.
Reasons for decision
Assessable income for a non-resident of Australia includes ordinary income derived directly or indirectly from all Australian sources during the income year (Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)).
The source of a pension is the location of the pension fund, and the source of an annuity is where the contract was made. If a pension or annuity has an Australian source, then it will be taxable in Australia unless it is overridden by a Double Tax Agreement (DTA).
In the overseas and Australian double tax agreement any pension (NOT including government service pensions), or other similar payment or any annuity paid to a resident overseas shall be taxable only overseas (Schedule 16-Article 17(1)).
Article 18(2) "Government Service" states that any pension paid by, or out of funds created by Australia or a political sub-division or local authority of Australia, to any individual in respect of services rendered to Australia or sub-division or local authority of Australia, shall be taxable in Australia.
Article 18(3) goes on to say that "the provisions of paragraphs 1 and 2 shall not apply to remuneration or pensions in respect of services rendered in connection with trade or business carried on by one of the contracting states or a political sub-division or local authority thereof. In such a case, the provisions of Articles 14,15 and 17 shall apply."
As you where employed by a state government but not in connection with a trade or business, you received a pension in respect of services rendered to an Australian state government. The pension is paid from a superannuation fund operated by an Australian state government, therefore the pension is paid by or out of funds created by a political sub-division of Australia.
Accordingly, your pension received as a result of your state government service will be assessable in Australia and taxable at non-resident rates.
Further issues for you to consider:
Please note that your place of residence and taxation overseas may allow for you to claim a foreign tax offset/credit for part or all of the tax paid in Australia.
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