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Ruling
Subject : Foreign Pension - Assessability
Question
Are the pensions you receive from Country A assessable in Australia?
Answer
Yes.
This ruling applies for the following periods
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
The scheme commenced on
1 July 2009
Relevant facts
You are an Australian resident for income tax purposes.
You entered Australia on a permanent visa.
You receive pensions from Country A.
There is a tax treaty between Australia and Country A.
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 an Australian resident includes the ordinary income derived from all sources, whether in or out of Australia, during the income year.
Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).
Section 10-5 of the ITAA 1997 lists the provisions about assessable income. The listed provisions include amounts in assessable income that are not ordinary income or which vary or replace the rules that would otherwise apply for certain kinds of ordinary income.
Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign pension scheme to provide superannuation benefits are included in assessable income.
However, in determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement.
Section 4 of the International Tax Agreements Act 1953 incorporates that Act with the Income Tax Assessment Act 1936 and the ITAA 1997 so that the Acts are read as one.
Australia has signed a double tax agreement with Country A.
An article in the agreement provides that any pension (including government pensions) or annuity derived from Country A by an Australian resident is taxable only in Australia.
Accordingly, as you are an Australian resident, your pensions should be included in your assessable income in the year of receipt under subsection 6-5(2) of the ITAA 1997.