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Edited version of private ruling
Authorisation Number: 1011859898502
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Ruling
Subject: Assessability of Country X military pension
Question:
Is your Country X military pension taxable in Australia?
Answer:
No.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
The scheme commenced on:
1 July 2008
Relevant facts and circumstances
You are in receipt of a Country X military pension.
You are a citizen of Country X.
You are a citizen and resident of Australia.
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) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
In your case, you are a resident and citizen of Australia in receipt of a Country X military pension. Under subsection 6-5(2) of the ITAA 1997 this income would ordinarily be taxable in Australia.
However, the tax treaty between Australia and Country X overrides subsection 6-5(2) of the ITAA 1997 so that if the treaty states that income is exempt from tax in Australia, you do not need to include it in your tax return.
In regards to government pensions, the tax treaty states that pensions paid by Country X to a citizen of Country X are exempt from tax in Australia.
Therefore, in your case your Country X military pension, being a government pension, is not taxable in Australia as it is being paid by Country X and you are a Country X citizen. You do not need to include this income in your Australian tax return.