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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012528810879

Ruling

Subject: Assessability of overseas pension

Question and answer

Is your war disability pension which you receive from the overseas armed forces exempt from tax in Australia?

Yes.

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 commenced on:

1 July 2013

Relevant facts and circumstances

You receive a war disability pension from the overseas armed forces.

This pension is tax exempt overseas.

You receive the pension as a result of injuries you sustained while serving in the overseas armed forces.

You are a resident of Australia for tax purposes.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 6-15.

Income Tax Assessment Act 1997 Section 11-15.

Income Tax Assessment Act 1997 Section 53-10.

Income Tax Assessment Act 1997 Section 52-65.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), provides that the assessable income of an Australian resident includes ordinary income and statutory income they derived directly or indirectly from all sources whether in or out of Australia.

However, subsection 6-15(2) of the ITAA 1997 provides that any income that is exempt income will not be included in assessable income.

Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 53-10 of the ITAA 1997 which deals with wounds and disability pensions.

Section 53-10 of the ITAA 1997 provides that wounds and disability pensions (Item 5) are wholly exempt provided that the payment is:

    · of a kind specified in subsection 315(2) of the Income and Corporation Taxes Act 1988 of the overseas country, and

    · similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997.

To determine whether your disability pension is exempt income under section 53-10, we firstly need to examine subsections of the relevant income and corporations taxes act. These subsections provide that:

    1. Income from wounds and disability pensions to which this subsection applies shall be exempt from income tax and shall not be reckoned in computing income for any purposes of the Income Tax Acts.

    2. Subsection (1) above applies to-

    a) wounds pensions granted to members of the naval, military or air forces of the Crown;

    b) retired pay of disabled officers granted on account of medical unfitness attributable to or aggravated by naval, military or air-force service;

    c) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service;

    d) disablement pensions granted to persons who have been employed in the nursing services of any of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service; and

    e) injury and disablement pensions payable under any scheme made under the [1914 c. 30.] Injuries in War (Compensation) Act 1914, the [1914 c. 18 (5 & 6 Geo. 5 c. 18).] Injuries in War Compensation Act 1914 (Session 2) and the [1915 c. 24.]. Injuries in War (Compensation) Act 1915 or under any War Risks Compensation Scheme for the Mercantile Marine.

In your case, you sustained injuries while serving in the overseas armed forces. As a result, your war disability pension satisfies paragraph 315(2)(c) and is considered to be of the kind specified in subsection of the relevant income and corporation taxes act.

The second limb of section 53-10 of the ITAA 1997 which needs to be examined is whether your war disability pension is similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997.

Section 52-65 of the ITAA 1997 contains a list of pensions or other payments made under the Veterans' Entitlements Act 1986. Item 10.1 lists pensions for defence-caused death or incapacity as exempt. Your disability pension is considered similar in nature to this payment because it is due to a disability arising out of injury suffered whilst you were a member of the overseas armed forces.

Your war disability pension meets the requirements set out in section 53-10 of the ITAA 1997 and therefore is exempt from tax in Australia.


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