Edited version of private advice

Authorisation Number: 1052343196685

Date of advice: 23 December 2024

Ruling

Subject: Classification of pension under the double taxation agreement.

Question

Are the ongoing payments you receive from the Australian Government, classified as a 'pension payment' for purposes of the pension's articles in Australia's double taxation agreements (DTA's)?

Answer

Yes. The term 'pension' is not defined in any of the DTAs and therefore takes the meaning it has under domestic law. A pension is defined in the Macquarie Dictionary as '1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity'.

Under Australia's DTAs, pensions paid by the Australian Government are generally included in the Pensions Article and are taxable only in the country of residence of the recipient. Although, in some DTAs, government pensions paid in respect of services rendered to that government are dealt with under the Government Services Article rather than the Pensions Article, this does not affect the treatment of your payments made under section 19. This is because the payments are made in consideration of injury or loss of wages and not for past services to the Government.

This ruling applies for the following period:

DD MM YY

The scheme commenced on:

DD MM YY

Relevant facts and circumstances

On the specified date you received a letter advising your entitlement to claim for incapacity payments has been reassessed. Upon being awarded the entitlement you will no longer required to provide ongoing medical evidence.

You have stated you do not need to reapply for these payments and these payments were granted due to injury sustained in previous employment. This entitlement is in place of the special rate disability pension (SRDP) which is an alternate form of periodic compensation for the same purpose.

You were offered both type of payments and selected the incapacity payments.

You have stated the following in relation to your tax residency:

•                     You intend to reside overseas permanently and have spent most of the last 12 months overseas.

•                     You are a dual citizen of another country and Australia and do not require a visa to live, work or retire overseas.

•                     You have removed yourself from the Australian electoral roll and taken various steps to permanently move overseas.

•                     You have cancelled your membership, closed your business and cancelled relevant registrations.

•                     You intend to leave Australia permanently next year.

Assumptions

You will be leaving Australia permanently in the specified financial year and will not be an Australian resident for tax purposes.

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