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Edited version of private ruling
Authorisation Number: 1011697969193
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Ruling
Subject: Foreign income - Pension
Is the social security pension you receive from Country X assessable in Australia?
Answer:
No.
This ruling applies for the following periods:
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commenced on:
1 July 2010.
Relevant facts:
You are an Australian resident for tax purposes.
You are an Australian citizen.
You receive a social security pension from Country X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident for tax purposes includes ordinary income derived directly or indirectly from all sources during the income year.
Section 4 of International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations).
An article to the Agreements Act contains the tax treaty between Australia and Country X (Country A Convention). The Country X Convention operates to avoid the double taxation of income received by residents of Australia and the Country X.
An article of the Country X Convention provides that social security payments from Country X to a resident of Australia for tax purposes shall only be taxed in Country X .
In your case, you are an Australian resident for tax purposes who receives a social security pension from Country X.
Therefore, the social security pension you receive from Country X is not included in your assessable income in Australia under section 6-5 of the ITAA 1997, but is subject to tax in Country X.