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Ruling
Subject: Foreign pension
Question 1
Is the Country A Invalids Benefit pension paid to you included in your assessable income pursuant to subsection 6-5(2) of the Income Tax Assessment Act 1997 for the income years ended 30 June 2009, 30 June 2010, 30 June 2011 and 30 June 2012 respectively?
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 ended 30 June 2012
The scheme commences on:
1 July 2008
Relevant facts and circumstances
You are an Australian resident for income tax purposes.
You are in receipt of the Country A (Country A) Invalids Benefit pension which is paid to you by Country A.
You have stated that your Country A Invalids Benefit pension is "portable Superannuation/Veterans pension".
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2),
International Tax Agreements Act 1953 Section 3AAA and
International Tax Agreements Act 1953 Section 5.
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 ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable tax treaties.
The International Tax Agreements Act 1953 (Agreements Act) overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
There is a double tax agreement between Australia and Country A (Country A Convention) which operates to avoid the double taxation of income received by residents of Australia and Country A.
Article X of the Country A Convention states that pensions paid to an Australian resident shall be taxable only in Australia. However, pensions arising in Country A (other than portable Country A superannuation or Country A portable veteran's pension or equivalent Country A portable payments) shall not be taxed in Australia to the extent that such income is not subject to tax in Country A if the recipient were a Country A resident.
Thus, the effect of Article X of the Country A Convention is that portable Country A superannuation or Country A portable veteran's pension or equivalent Country A portable payments paid to an Australian resident are taxable only in Australia.
You are an Australian resident for income tax purposes.
You are in receipt of the Country A Invalids Benefit pension which is paid to you by Country A.
You have stated that your Country A Invalids Benefit pension is "portable Superannuation/Veterans pension".
It follows that because you are an Australian resident and your Country A Invalids Benefit pension is a portable Country A superannuation or Country A portable veteran's pension, your Country A Invalids Benefit pension is taxable in Australia pursuant to Article X of the Country A Convention.
Therefore, your Country A Invalids Benefit pension is included in assessable income pursuant to subsection 6-5(2) of the ITAA 1997.