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Edited version of your written advice
Authorisation Number: 1013034736352
Date of advice: 17 June 2016
Ruling
Subject: Maintenance payments
Question
Are maintenance payments you received assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2015
Relevant facts and circumstances
You are an Australian citizen.
Your marriage is over and you are separated from your ex-spouse.
You moved back to Australia and became a resident of Australia for taxation purposes.
Your ex-spouse resides and works in Foreign Country A.
You are receiving Foreign Country A court awarded maintenance payments from your ex-spouse.
You have provided copies of the Marital Settlement Agreements.
You and your ex-spouse sold the Australian property following the amended agreement.
Your ex-spouse has placed their portion of the proceeds into an Australian account which makes maintenance payments to you until the scheduled termination date.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 6-15(2)
Income Tax Assessment Act 1997 Section 11-15
Income Tax Assessment Act 1997 Section 51-50
International Tax Agreements Act 1953
Reasons for decision
Subsection 6-5(2) of the 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.
Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income.
Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Section 51-50 of the ITAA 1997 is included in this list.
Paragraph 51-50(2)(a) of the ITAA 1997 provides that periodic maintenance payments made to a person who is, or was, a spouse of the maintenance payer are exempt from income tax.
In your case, you are receiving Foreign Country A court awarded maintenance payments from your ex-spouse; your ex-spouse resides and works in the Foreign Country A. Therefore, you are receiving foreign sourced income. In determining liability to tax on the foreign sourced income you received it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreement Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one.
There is a double tax agreement between Australia and the Foreign Country A (the Convention).
The Convention is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Convention operates to avoid the double taxation of income received by Australian and the Foreign Country A residents.
Paragraph (x) of Article Y of the Convention provides that alimony or other maintenance payments arising in the Foreign Country A and paid to a resident of Australia shall be taxable only in the Foreign Country A.
Therefore, the maintenance payments you received from your ex-spouse are not assessable income under subsection 6-5(2) of the ITAA 1997.
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