ATO Interpretative Decision

ATO ID 2001/769 (Withdrawn)

Income Tax

• This ATO Interpretative Decision is withdrawn from the database because it contains references to the tax treaty between Australia and the United Kingdom that was replaced with a new tax treaty which is effective from 17 December 2003. Despite its withdrawal from the database, this ATO Interpretative Decision continues to be a precedential view in respect of decisions for income years up to, and including, the 2003-2004 income year.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is a United Kingdom (UK) Police pension received by an Australian resident taxpayer and first payable prior to 1 July 1983, assessable under subsection 26AA(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. A UK Police pension received by an Australian resident taxpayer and first payable prior to 1 July 1983 is assessable under subsection 26AA(1) of the ITAA 1936.

Facts

The taxpayer has been receiving a pension, which was first payable prior to 1 July 1983, from the UK Police Pension Scheme.

The taxpayer is now an Australian resident and the payments are made in the form of a superannuation pension/annuity on a monthly basis.

Reasons for Decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income it is not included in the assessable income of the taxpayer (section 6-15 of the ITAA 1997).

Agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operates to prevent the double taxation of income.

Paragraph 14(1) of Schedule 1 to the Agreements Act provides that any pension or annuity derived from the UK by a resident of Australia will be exempt from tax in the UK. The pension or annuity will therefore be taxable in Australia.

Former subsection 26AA(1) of the ITAA 1936 provides that annuities first payable to a taxpayer prior to 1 July 1983 are included in the assessable income of the taxpayer with the undeducted purchase price excluded if the annuity has been purchased. Although subsection 26AA(1) of the ITAA 1936 has been repealed, transitional provisions apply to continue to assess annuities which first became payable before 1 July 1983.

The Australian resident taxpayer has received a pension from the UK Police Pension Scheme which is not taxable in the UK. As the pension was first payable prior to 1 July 1983, the assessable income of the taxpayer will include the pension reduced by the undeducted purchase price under subsection 26AA(1) of the ITAA 1936.

Legislative References:
Income Tax Assessment Act 1936
   subsection 26AA(1)

Keywords
Foreign income
Foreign pension
Foreign pension income
Foreign superannuation income
United Kingdom

Business Line:  Small Business/Individual Taxpayers

Date of publication:  7 December 2001

ISSN: 1445-2782