1052104300050 | Legal database

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Edited version of private advice

Authorisation Number: 1052104300050

Date of advice: 6 April 2023

Ruling

Subject: Foreign war pension

Question

Is your war pension exempt from tax?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a permanent resident of Australia.

You receive a War Pension from country A.

The pension is of a kind specified in 315(2) of the Income and Corporation Taxes Act 1988 of Country A.

Your pension is tax free in country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 11-5

Income Tax Assessment Act 1997 Section 53-10

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Subsection 6-15(2)

Income Tax Assessment Act 1936 Paragraph 23AD(3)(c)

Reasons for decision

Included in the list of exemption income in ITAA 1997 section 11-5 is section 53-10 of the ITAA 1997 which deals with wounds and disability pensions.

Section 53-10 of the ITAA 1997 provides that wounds and disability pensions (Item 5) are wholly exempt provided that the payment is:

(a) of a kind specified in sub-section 315(2) of the Income and Corporation Taxes Act 1988 of Country A; and

(b) similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997.

Subsection 315(2) of the Income and Corporation Taxes Act 1988 of the United Kingdom provides that income from wounds and disability pensions are exempt from income tax if they are:

(a) wounds pensions granted to members of the naval, military or air forces of the Crown; or

(b) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service.

Section 53-10 of the ITAA 1997 has equivalent wording to the repealed paragraph 23AD(3)(c) of the Income Tax Assessment Act 1936 (ITAA 1936). The application of paragraph 23AD(3)(c) of the ITAA 1936 is considered in Taxation Ruling IT 2586.

IT 2586 states that the Commissioner accepts that the exemption provided in paragraph 23AD(3)(c) of the ITAA 1936 applies to any such pensions payable by any government and the exemption applies irrespective of the age of the pensioner.

As the wording of paragraph 23AD(3)(c) of the ITAA 1936 is equivalent, in all relevant respects, to section 53-10 of the ITAA 1997 it is appropriate that the reasoning in IT 2586 should be applied to the interpretation of section 53-10 of the ITAA 1997.

In your case, the War Pension you receive is paid by reason of your disabilities arising out of wounds and injuries suffered while serving in the military. The pension is paid under subsection 315(2) of the Income and Corporation Taxes Act 1988 of Country A. Therefore, your pension meets the requirement for exemption under section 53-10 of the ITAA 1997.

Accordingly, your War Pension is exempt from tax.

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