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Edited version of private ruling
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Ruling
Subject: Assessability of foreign social security pension
Question 1
Is a social security pension from another country assessable in Australia?
Answer
No
This ruling applies for the following period
Year ending 30 June 2010
The scheme commenced on
July 2004
Relevant facts
You received a letter from the social security department of the other country in response to your application.
The letter stated that you were entitled to monthly benefits beginning a number of years ago. The letter also advised that before you are entitled to the benefits, you need to fulfil the conditions for the receipt of the benefit.
It was determined that you fulfilled the conditions and qualified for the benefit after the required waiting period.
The letter advised of a lump sum payment for a number of years, the amount of monthly pension and the time of the month it would be deposited into your nominated bank account.
You received a subsequent letter advising the month that your benefits would be paid from. The letter also advised of an increased lump sum payment form that previously advised. You will then receive a specified monthly amount early each month.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 6-5
Subsection 6-5(2)
International Tax Agreements Act 1953
Section 3AAA
Section 4
Section 5
Reasons for decision
Question 1
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.
However, Australia has a tax treaty with the other country (the Treaty) which operates to avoid the double taxation of income received by residents of Australia and the other country.
Section 4 of the International tax Agreements Act 1953 (the Agreements Act) incorporates that Act with the ITAA 1997 so that both those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions).
A Paragraph of the Treaty provides that social security payments paid from the other country to a resident of Australia shall only be taxed in the other country.
Therefore, the social security benefit you receive is therefore not assessable income under section 6-5 of the ITAA 1997, but is subject to tax in the other country.