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Edited version of your private ruling
Authorisation Number: 1012453915709
Ruling
Subject: Income - foreign resident
Question
Is your spouse's benefit assessable in Australia?
Answer
No
This ruling applies for the following periods
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on
1 July 2013
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 a foreign resident for tax purposes.
You are a resident of country X.
Your spouse was a member of an Australian superannuation fund.
You have been receiving your spouse's benefits from Australia since your spouse's death.
Relevant legislative provisions
Taxation Administration Act 1953 Section Sch1-12-80
Income Tax Assessment Act 1997 Subsection 6-5(3)
International Tax Agreements Act 1953
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, whether in or out of Australia, during the income year.
Subsection 6-5(3) of the 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(2) and 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.
The tax treaty between Australia and the country X contains an article which specifically deals with the taxation of pensions and annuities income. This Article provides that pensions paid to an individual who is a resident of country X, shall be taxed only in country X.
Therefore, as you are a resident of country X the article of the tax treaty will apply and the pension you receive will be exempted income in Australia and not assessable under section 6-5(3) of the ITAA 1997.
Requirement to withhold from payment
Section 12-80 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) provides that a payer is to withhold PAYG tax from superannuation pension payments made to an individual.
However, subsection 12-1(1) of Schedule 1 of the TAA 1953 provides that PAYG tax need not be withheld if a payment is exempt income in the hands of the person receiving the payment.
As your pension is exempt from income tax in Australia, PAYG will not need to be withheld from the pension under section 12-80 of Schedule 1 of the TAA 1953.