ATO Interpretative Decision
ATO ID 2002/108 (Withdrawn)
Income Tax
Assessability of a Canadian aged pension - foreign tax creditsFOI status: may be released
-
This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found at the following Foreign Income; TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is a Canadian aged pension derived by an Australian resident taxpayer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. A Canadian aged pension derived by an Australian resident taxpayer is assessable under section 6-5 of the ITAA 1997 however a foreign tax credit will be allowed for foreign tax paid.
Facts
The taxpayer is an Australian resident for income tax purposes.
The taxpayer receives an aged pension from Canada.
The taxpayer has paid tax on this income in Canada at the rate of 15 per cent.
Reasons for Decision
Subsection 6-5(2) of the 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.
An aged 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 double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).
Schedule 3 to the Agreements Act contains the double tax agreement between Australia and Canada (the Canadian Convention). The Canadian Convention operates to avoid the double taxation of income received by Australian and Canadian residents.
Article 18 of the Canadian Convention provides that a pension received by an Australian resident from Canada may be taxed in Australia. However, the Canadian pension is also subject to tax in Canada but the rate of tax is not to exceed 15 per cent.
Paragraph (1) of Article 23 of the Canadian Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in Canada will be allowed against Australian tax paid on income from Canadian sources.
The Canadian pension received by the taxpayer is included in their assessable income under section 6-5 of the ITAA 1997. As foreign tax has been paid in relation to this pension, a foreign tax credit will be allowed. As the Canadian tax paid on the pension is less than the Australian tax that will be payable the taxpayer will be entitled to a full credit for the Canadian tax paid.
Date of decision: 8 November 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
subsection 6-5(2)
Schedule 3, Article 18
Schedule 3, Article 23(1)
Keywords
Foreign pension income
Double tax agreements
Foreign tax credits
ISSN: 1445-2782
| Date: | Version: | |
| 8 November 2001 | Original statement | |
| You are here | 19 December 2018 | Archived |