Edited version of private ruling

Authorisation Number: 1011852644395

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Ruling

Subject: Foreign pension

Question

Are the monthly pension payments you receive from country A assessable in Australia?

Answer: No.

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2010

Relevant facts

You are a resident of Australia for tax purposes.

You receive a pension from the country A.

The pension is from your late spouse's membership of a government employee's pension fund in country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-10.

Income Tax Assessment Act 1997 Section 10-5.

Income Tax Assessment Act 1936 Section 27H.

International Tax Agreements Act 1953 Section 4.

International Tax Agreements Act 1953 Schedule Sch#.

International Tax Agreements Act 1953 Sch#-Art19.

Income Tax Assessment Act 1997 Subsection 6-10(4).

Reasons for decision

Subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia.

Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income.

In determining liability to tax on foreign sourced income received by an Australian resident, 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 (Agreements Act).

Schedule # to the Agreements Act contains the tax treaty and the protocol between Australia and country A. The country A Agreement operates to avoid the double taxation of income received by Australian and country A residents.

Article 19 of the country A Agreement deals with salary and wages, pensions and annuities derived from government service in country A.

Article 19(1)(a) provides that a pension paid out of country A to an individual in respect of services rendered in the discharge of government functions is only taxable in country A.

Article (2)(b) provides that a pension paid out of country A to an individual in respect of services rendered in the discharge of government functions will be taxable in Australia if the recipient is a resident and a citizen or national of Australia and the services were rendered in Australia.

In your case, you are considered a resident of Australia for tax purposes but are not a citizen or national of Australia. You receive an annuity in respect of your late spouse's membership of a government employee's pension fund Therefore, article 19 of the Agreements Act applies to your situation and the country A pension you receive does not need to be included in your assessable income in Australia.

Note: from 1 July 2011 the legislative mechanism for incorporating the International Agreements with other tax jurisdictions into the Australian tax legislation has altered. There will be no effect on the operation of the terms of the Agreements.