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Edited version of your written advice
Authorisation Number: 1012687583382
Ruling
Subject: Foreign pension payments
Question 1
Will your superannuation pension from an overseas country (the overseas country) be assessable in Australia?
Answer
Yes.
Question 2
Will you be entitled to a foreign income tax offset for tax paid in the overseas country on your superannuation pension?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2016
The scheme commences on:
1 July 199X
Relevant facts and circumstances
You are an Australian resident for taxation purposes.
You worked in an overseas country and contributed to an approved superannuation fund in that country.
The contributions were deducted from your salary and were taxed at the relevant marginal rate.
You are not able to access those monies in the superannuation fund prior to reaching retirement age.
You will have attained retirement age in the year ending 30 June 2016.
There is a tax treaty between Australia and the overseas country.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Subsection 6-10(4)
Income Tax Assessment Act 1997 Section 10-5
Income Tax Assessment Act 1936 Section 27H
International Tax Agreements Act 1953 Section 4
Reasons for decision
Summary
In accordance with the tax agreement between Australia and the overseas country, your pension payments from a superannuation fund located in the overseas country will form part of your Australian assessable income and only be taxed in Australia.
Pension from an overseas source
Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes statutory income amounts which are not ordinary income but are included in assessable income by another provision.
Subsection 6-10(4) of the ITAA 1997 states that the assessable income of an Australian resident, includes statutory income from all sources, whether in or out of Australia.
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income.
In determining liability to Australian tax on foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable tax treaty.
Australia has a tax treaty (Agreement) with the overseas country which operates to avoid the double taxation of income received by Australian and the overseas country's residents.
In the Agreement it provides that pensions, including retirement annuities paid to a resident of Australia shall be taxable only in Australia.
Therefore, your superannuation pension that you will receive from the overseas country will be included in your assessable income in Australia pursuant to an article in the Agreement and subsection 6-10(4) of the ITAA 1997.
Foreign income tax offset
Subsection 770-10(1) of the ITAA 1997 provides for a foreign income tax offset for an income tax year for foreign income tax paid in respect of an amount that is included in assessable income.
Section 770-15 of the ITAA 1997 defines 'foreign income tax' to include a tax on income that is imposed by a law other than an Australian law. A note to section 770-15 of the ITAA 1997 points out that 'foreign income tax' includes only that which has been correctly imposed under the foreign law, and where the foreign jurisdiction has a tax treaty with Australia under the Agreements Act, foreign income tax includes only tax which has been correctly imposed under the treaty.
Under an article in the Agreement, pensions and annuities paid to an Australian resident shall be taxable only in Australia. Therefore the superannuation payment you will receive from the overseas superannuation fund will only be taxable in Australia. No tax should be paid or withheld from the amounts in the overseas country.
Consequently, should the overseas country impose tax on your superannuation pension that tax will not satisfy the definition of 'foreign income tax' as Australia has the sole taxing right on your superannuation pension. Therefore, no foreign income tax offset will be allowed for any tax paid in the overseas country.
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