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Edited version of private ruling
Authorisation Number: 1011721644556
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Ruling
Subject: Disability pensions
Question
Are the disability pensions that you receive from country X assessable in Australia?
Answer: Yes.
This ruling applies for the following periods:
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commences on:
1 July 2007
Relevant facts and circumstances
You receive two small disability/ill health pensions from country X.
Both pensions are whole of life pensions and are payable to your nominated spouse or dependant upon your death.
There is a tax treaty between Australia and country X.
Relevant legislative provisions
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 a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
A disability pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one.
A Schedule to the Agreements Act contains the tax treaty between Australia and country X (the country X Convention). The country X Convention operates to avoid the double taxation of income received by Australian and country X residents.
An Article of the country X Convention provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia.
Therefore, the pensions you are receiving from country X are assessable in Australia under subsection 6-5(2) of the ITAA 1997.