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Edited version of your private ruling
Authorisation Number: 1012090554895
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Ruling
Subject: foreign pension
Question 1
Is the Country A pension X paid to you included in your assessable income pursuant to subsection 6-5(2) of the Income Tax Assessment Act 1997 for the year ended 30 June 2011?
Answer
Yes.
Question 2
Is the Country A pension Y paid to you included in your assessable income pursuant to subsection 6-5(2) of the Income Tax Assessment Act 1997 for the year ended 30 June 2011?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commences on:
1 July 2010
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are an Australian resident for income tax purposes.
You are in receipt of the Country A pension X which is paid to you by Country A.
You are also in receipt of the Country A pension Y which is paid to you by Country A.
You have stated that your Country A pension X is a portable Country A superannuation or portable veteran's pension or equivalent portable payment arising in Country A.
You have stated that your Country A pension Y is not a portable Country A superannuation or portable veteran's pension or equivalent portable payment arising in Country A.
Your Country A pension Y is not taxable in Country A and the Country A pension Y would not be taxable in Country A even if the recipient were a Country A resident.
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 18(1) 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 18(1) 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.
o You are an Australian resident for income tax purposes.
o You are in receipt of the Country A pension X which is paid to you by Country A.
o You are also in receipt of the Country A pension Y which is paid to you by Country A.
o Your Country A pension Y is not taxable in Country A and the Country A pension Y would not be taxable in Country A even if the recipient were a Country A resident.
o You have stated that your Country A pension X is a portable Country A superannuation or portable veteran's pension or equivalent portable payment arising in Country A.
o You have stated that your Country A pension Y is not a portable Country A superannuation or portable veteran's pension or equivalent portable payment arising in Country A.
It follows that because you are an Australian resident and your Country A pension X is a portable payment, your Country A pension X is taxable in Australia pursuant to Article 18(1) of the Country A Convention.
It follows that because you are an Australian resident and your Country A pension Y is not a portable payment and the Country A pension Y would not be taxable in Country A even if the recipient were a Country A resident, your Country A pension Y is not taxable in Australia pursuant to Article 18(1) of the Country A Convention.
Therefore, only your Country A pension X is included in assessable income pursuant to subsection 6-5(2) of the ITAA 1997.