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Edited version of private advice
Authorisation Number: 1051528746117
Date of advice: 18 June 2019
Ruling
Subject: Assessability of Australian pension income
Question
Is the Australian sourced superannuation scheme pension income derived by a resident of another country assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You were employed and retired in the financial year ended 30 June 20XX. You will receive a superannuation scheme pension.
Your spouse is retired and is in receipt of a superannuation scheme pension.
Your primary source of income is the superannuation pension paid by the superannuation scheme.
Your only other income will be interest earned on savings from accounts held in Australia.
You will move to another country and establish a permanent residence there in the near future (exact date is yet to be determined).
The superannuation scheme requires that pensions are paid to bank accounts in Australia regardless of the recipient's residence.
You will continue to operate bank accounts in Australia and access/transfer funds as needed.
Relevant legislative provisions
International Tax Agreements Act 1953section 4
International Tax Agreements Act 1953section 10A
Income Tax Assessment Act 1936 section 6-5(3)
Reasons for decision
Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.
Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.
In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.
The Agreements Act contains the double tax agreement between Australia and the country in which you intend to reside. The Agreement operates to avoid the double taxation of income derived by Australian and residents of another country and also to prevent fiscal evasion with respect to taxes on income.
The double tax agreement deals with pensions and annuities. It states that pensions (including government pensions) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State.
As a resident and citizen of another country, the double tax agreement applies. Therefore, the pension income derived by the taxpayer from the superannuation scheme in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.
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