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Edited version of private ruling
Authorisation Number: 1011498972876
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Ruling
Subject: Foreign pension
Question and Answer:
Are you assessable on the portion of your foreign pension which relates to your spouse?
Yes
This ruling applies for the following periods:
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You are the recipient of an aged pension from an overseas country.
Your pension includes two components, one being your personal pension and the other a portion paid to you on behalf of your spouse.
You have provided a letter which indicates the payment on behalf of your spouse is paid directly to your spouse.
You have also provided a letter which gives a break-up of the amount pertaining to your personal pension and the amount payable to your spouse.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2).
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that the assessable income of a resident of Australia includes income derived directly or indirectly by him/her from all sources whether in or out of Australia, during the income year.
Based on the above, for income tax purposes the individual in whose name a payment is made is the one who is assessed on such payment.
Pensions may include amounts representing maintenance payments in respect of the spouse and dependants of the recipient. This does not render those payments assessable to the spouse or the dependants. Assessability of the pension as a whole rests with the person who derives the pension.
Accordingly, as a resident of Australia for income tax purposes, the entire pension paid to you by the foreign country, including the spouse portion should be included in your assessable income. This is despite the fact that spouse portion is paid separately to your spouse as per documentation provided.
Note
You may be entitled to a tax deduction for any undeducted purchase price in respect of your pension. This is an annual deduction which you make in your tax return.
The UPP of your pension is the portion of the capital amount of your pension purchased by you. A tax deduction for your personal contributions must not have been allowed or be allowable. The UPP is an amount that can be claimed over the life of your pension. Each year a portion of the UPP can be used to reduce the pension income on your tax return. This is called the deductible amount.
If you would like to know if you are eligible for a UPP deduction and if so, how much you are entitled to claim as a deduction each year in your tax return, please complete the attached form and send it to:
Australian Taxation Office
PO Box 3100
PENRITH NSW 2740