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Ruling
Subject: Foreign income
Question
Is the monthly disability compensation benefit you receive from country X assessable in Australia?
Answer
No.
This ruling applies for the following periods:
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 2010
Relevant facts and circumstances
You are a citizen of country X.
You are an Australian resident for income tax purposes.
You receive a monthly disability benefit from country X.
You are paid this benefit because you sustained an injury while employed by the defence forces of country X.
The benefit is not subject to tax in country X.
There is a tax treaty between Australia and country X.
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 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.
In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement.
Australia has signed a double tax agreement with country X.
An article in the agreement provides that wages, salaries and similar remuneration, including pensions, paid to a citizen of country X from funds of country X for labour or personal services performed as an employee in the discharge of governmental functions of country X shall be exempt from tax in Australia.
Therefore the monthly disability benefit you receive for your past services to the defence forces of country X is exempt income and not assessable in Australia.