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Edited version of private ruling
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Ruling
Subject: Assessability of Australian sourced pension to foreign resident
Question 1
Is the Australian reversionary pension you anticipate to receive in the event you survive your spouse, taxable in Australia?
Answer
No
This ruling applies for the following period
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 2011
Relevant facts
You and your spouse are living permanently in another country and expect to remain residents of the other country for income tax purposes.
Your spouse receives an Australian Commonwealth Superannuation pension.
You anticipate that you will receive a reversionary pension as a result of your spouse's entitlements in the event that you should survive your spouse.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-10(5)
Income Tax Assessment act 1936 Section 27H
International Tax Agreements Act 1953 Section 3AAA
International Tax Agreements Act 1953 Section 5
Reasons for decision
Question 1
Subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) includes annuities and superannuation pensions as assessable income.
In determining liability to Australian tax on Australian sourced income received by a non resident it is necessary to consider not only the income tax laws but also any applicable tax treaty between Australia and the country of residence of the income recipient.
Australia has a tax treaty with the other country (the Convention) which operates to avoid the double taxation of income received by residents of Australia and the other country.
An Article of the Convention provides that pensions and annuities paid from Australia to a resident of the other country shall be taxable only in the other country.
You are a resident of the other country for income tax purposes and anticipate you will receive an Australian sourced reversionary pension in the event that you should survive your spouse.
Under an Article of the Convention, an Australian sourced pension paid to you will be taxable only in the other country if you remain a resident of the other country for income tax purposes.
Accordingly, an Australian reversionary pension when received in the event that you should survive your spouse is not assessable income under subsection 6-10(5) of the ITAA 1997, while you remain a resident of the other country for income tax purposes.