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Edited version of your private ruling
Authorisation Number: 1012335998100
Ruling
Subject: Foreign income
Question and answer
Is the withdrawal payment you received from an overseas pension fund assessable in Australia?
Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You are an Australian resident for tax purposes.
You were an International Organisation staff member for a number of years while you were living in an overseas country.
You contributed to an overseas pension fund associated with the International Organisation.
As your length of service with the International Organisation was less than five years, you were eligible for a lump sum withdrawal payment.
A lump sum withdrawal payment was paid to you rather than a pension payment as your length of service was less than the required years in order to be eligible for a pension payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 6-10(4)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Section 6-10(4) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes statutory income derived from all sources, whether in or out of Australia, during the year of income.
You received a withdrawal payment from an overseas pension fund which was paid to you upon separation from employment with an International Organisation. A lump sum withdrawal payment was paid to you rather than a pension payment as your length of service was less than the required years to be eligible for a pension.
In your case, your withdrawal settlement payment is a separation payment and was paid to you as a withdrawal payment rather than a retirement benefit as you did not have sufficient contributory service to be eligible for a pension.
As your payment was paid by the overseas pension fund, it is necessary to consider the specific provisions in Australian law in relation to privileges and immunities of International Organisations. Taxation Ruling TR 92/14 describes the operation of privileges and immunities relating to taxation that apply to International Organisations and their staff and provides that these are governed by the International Organisations (Privileges and Immunities) Act 1963 (IO(P+I)A).
Paragraph 13 of TR 92/14 discusses pensions and states that a pension received from an International Organisation is not exempt from tax in Australia as the IO(P+I)A does not extend tax exemptions to a former officer of an International Organisation.
Although the payment you received was a withdrawal settlement payment rather than a pension, the same reasoning as set out in TR 92/14 applies to your situation, as the payment was made to you as a former officer of an International Organisation, the exemption provided in the IO(P+I)A does not apply to the withdrawal payment.
Therefore, the withdrawal settlement payment you received from the overseas pension fund is not exempt from tax in Australia and should be included as part of your assessable income under subsection 6-5(2) of the ITAA 1997.