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Edited version of private advice

Authorisation Number: 1051931285496

Date of advice: 9 December 2021

Ruling

Subject: Foreign pension income

Question

Is the pension you receive from Country Z included in your assessable income in Australia?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

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 are a citizen of Country Z and an Australian citizen.

You became an Australian citizen.

You are a resident of Australia for tax purposes.

You worked as a teacher in a government school in Country Z.

You receive an invalid pension as a result of the health problems.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

A pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

In determining liability to Australian tax on foreign source income it is necessary to consider not only the income tax laws but also any applicable tax treaty (double tax agreement).

There is a tax treaty between Australia and Country Z. The Country Z Agreement operates to avoid the double taxation of income received by Australian and Country Z residents.

Article 19 of the Country Z Agreement deals with government service pensions. Paragraph (2) of Article 19 of the Country Z Agreement provides that any pension paid to an individual in respect of services rendered in the discharge of governmental functions in Country Z will be taxable only in Country Z. However, the pension is taxable only in Australia if the individual is a citizen or national of Australia and a resident of Australia.

In your case, you are a citizen of both Country Z and Australia. Your pension is therefore taxable only in Australia under Article 19 of the Country Z Agreement and is consequently included in your assessable income in Australia under subsection 6-5(2) of the ITAA 1997.


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