Edited version of private ruling

Authorisation Number: 1011833728365

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Ruling

Subject: Taxation treatment of Australian income streams - non-resident

Questions:

Are pensions paid from Australian superannuation funds (taxed and untaxed) taxable in Australia for a resident of the Country A?

Answer: No.

This ruling applies for the following period:

1 July 2012 to 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts:

You are under 55 years of age.

You are a member of two Australian superannuation funds. These are:

· A Government superannuation scheme - an untaxed superannuation fund; and

· Another superannuation scheme - a taxed superannuation fund.

You plan to retire when you are over the age of 55 years and move to a foreign country.

You will be a resident of the foreign country for income tax purposes.

Assumptions:

Once you commence the pension from the Government superannuation scheme you will no longer be a contributory member of the Government superannuation scheme.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Section 6(1).

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Subsection 6-10(5).

Income Tax Assessment Act 1997 Subsection 995-1(1).

International Tax Agreement Act 1953 Section 4.

International Tax Agreement Act 1953 Schedule 1, Article 17(1).

Reasons for decision

Summary

As you will be a resident of the foreign country for income tax purposes and not a resident of Australia for tax purposes, the Australian superannuation pensions will be taxed in the foreign country.

Detailed reasoning

Taxation of Australian sourced pensions paid to a non-resident

Subsections 6-5(3) and 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) provide that the assessable income of a non-resident includes both the ordinary and statutory income derived from all Australian sources.

However, in determining your liability to Australian income tax after you have become resident of the foreign country for tax purposes, any double tax agreement between the foreign country and Australia needs to be considered along with the income tax laws. The double tax agreement is contained in the International Tax Agreement Act 1953 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.

Schedule 1 to the Agreements Act contains the Convention and Notes between Australia and the foreign country (the Convention). The Convention operates to avoid the double taxation of income received by Australian and residents of the foreign country.

An Article of the Convention deals with pensions and annuities. Under that Article of the Convention, pensions paid to a resident of the foreign country will be taxable only in the foreign country.

You should contact the authorities in the foreign country to determine what income tax rates will apply to your pension payments. Please note that any tax concessions which applied to the pensions when paid to an Australian resident will no longer apply.

In addition, the authorities in the foreign country should be able to provide you with a form which will stop your Australian superannuation funds from deducting Pay As You Go (PAYG) tax instalments once your pensions have commenced.