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Ruling

Subject: Foreign income

Question

Is the amount you receive from the country A assessable income in Australia?

Answer

Yes

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 commences on:

1 July 2008

Relevant facts and circumstances

You are an Australian resident for income tax purposes.

While working in the country A, you were involved in an incident at work which resulted in a personal injury.

You were awarded a lifetime weekly benefit payable under a scheme in country A.

The weekly benefit consisting of two components is paid directly into your overseas bank account every 4 weeks.

The payment is not taxable in the country A.

There is a tax treaty between Australia and country A.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 27H

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Section 6-10

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

Income Tax Assessment Act 1997 Section 10-5

International Tax Agreement Act 1953 Section 4

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).

The payment you receive is a fixed periodic payment made in consideration of an injury you sustained in the course of your work. Theses types of payments are considered to be a pension payment (Taxation Determination TD 93/151).

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 (DTA).

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 DTA with country A.

An article of the agreement provides that any pension (including government pensions) or annuity derived from country A by an Australian resident is taxable only in Australia.

Although the payment is not taxable in country A, for it to be non taxable in Australia it needs to be exempt under Australian law. There are no provisions in the Agreements Act, the ITAA 1936 or the ITAA 1997 which specifically exempt the pension from tax in Australia.

Accordingly, as you are an Australian resident, your payment should be included in your assessable income in the year of receipt.