Edited version of your private ruling

Authorisation Number: 1012466800379

Ruling

Subject: International Pension

Question

Is the overseas pension you receive assessable in Australia?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commences on:

1 July 2005

Relevant facts and circumstances

You are a resident of Australia for taxation purposes.

You receive a veterans' pension as a result of service with an overseas country Armed Forces.

You are currently a member of the Australian Defence Force and are serving overseas.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1997 Subsection 52-10(1A)

Income Tax Assessment Act 1997 section 23AG

International Tax Agreements Act 1953 Section 4

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 a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension income is ordinary income assessable under 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 double tax agreements.

Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).

Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The overseas Agreement is listed in section 5 of the Agreements Act. The Agreement operates to avoid the double taxation of income received by residents of Australia and the overseas country.

Article X of the overseas agreement provides that pensions paid to a resident of Australia shall be taxable only in Australia. Article X also includes armed forces veterans pensions paid by the overseas country.

Subsection 23AG(1) of the ITAA 1936 provides that the foreign earnings of an Australian resident derived during a continuous period of foreign service of not less than 91 days employment in a foreign country are exempt from tax in Australia.

Subsection 23AG(1AA) of the ITAA 1936 provides that foreign earnings are not exempt from tax unless the continuous period of foreign service is directly attributable to any of the following:

the delivery of Australia's overseas aid program by the individual's employer;

the activities of the individual's employer in operating a developing country relief fund or a public disaster relief fund;

the activities of the individual's employer being a prescribed institution that is exempt from Australian tax; or

the individual's deployment outside Australia by an Australian government (or an authority thereof) as a member of a disciplined force.

Your overseas country pension income is not derived as a result of your foreign service with the Australian defence force and is not attributable to any of the above activities. Your overseas country pension is therefore not exempt under section 23AG of the ITAA 1997.

Your overseas country pension income is assessable in Australia.