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Edited version of your private ruling
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Ruling
Subject: Pension income
Question
Is the superannuation pension that you will receive from the Commonwealth Government of Australia taxable in Australia?
Answer
Yes.
This ruling applies for the following period:
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 2011
Relevant facts and circumstances
You were employed by the Commonwealth Government of Australia for many years in a position that involved the discharge of a core, traditional governmental function.
You are applying for a superannuation pension from the Commonwealth Government of Australia.
You have dual citizenship with Australia and country B.
You are a permanent resident of country A.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5(3)
International Tax Agreements Act 1953 Section 4
Reasons for decision
Summary
The superannuation pension you will receive from the Australian Government is considered a pension from the Australian government for services performed as an employee in the discharge of governmental functions. Therefore, this pension is taxable in Australia.
Detailed reasoning
Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident includes all ordinary income derived from all Australian sources.
Pension payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.
In determining liability to Australian tax on Australian sourced income received by a foreign resident it is necessary to consider not only the income tax laws but also any applicable tax treaty.
Tax treaties are given the force of law domestically by the International Tax Agreements Act 1953 (the Agreements Act).
The Agreements Act states that where there are inconsistencies with an Act imposing Australian tax, the Agreements Act will prevail (except in relation to tax avoidance schemes).
An article of the tax treaty between Australia and country A provides that wages, salaries and similar remuneration, including pensions, paid from the funds of the Australian government for labour or personal services performed as an employee in the discharge of governmental functions to an Australian citizen, shall be taxable only in Australia.
In your case, you are not an Australian resident for taxation purposes. You have applied for a superannuation pension from the Commonwealth Government of Australia. This payment is considered a pension from the Australian government for services you performed as an employee in the discharge of governmental functions. As such, this pension is taxable in Australia.