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Edited version of your private ruling
Authorisation Number: 1012595491820
Ruling
Subject: Assessability of foreign pension and child allowance
Questions and answers:
1. Is your foreign sourced pension assessable in Australia?
Yes.
2. Are your foreign sourced child allowance payments assessable in Australia?
Yes.
This advice applies for the following period:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commenced on:
1 July 2013
Relevant facts
You are a resident of Australia for tax purposes.
You were employed in country X for a number of years.
While employed in country X the country X Government drew an amount from your wages and invested it for superannuation purposes.
Now that you are past the retirement age you receive a monthly pension paid by the country X Government.
You are also the legal guardian of a minor and as such receive a social security child allowance.
The child allowance is paid by the country X Government to the minor's legal guardian until the child reaches the age of 18. If the child proceeds to tertiary education the pension continues until the child reaches the age of 25.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6-5
Reasons for decision
Country X pension and child allowance
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes the ordinary income they derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Pensions and child allowance payments have the character of ordinary income and therefore are 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 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 country X Agreement is listed in section 5 of the Agreements Act.
The country X Agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The country X Agreement operates to avoid the double taxation of income received by residents of Australia and country X.
An article of the country X Agreement advises that pensions and social security payments (including government pensions) paid to a resident of Australia shall be taxable only in Australia. Child allowances are paid as a country X social security right and therefore are included as social security payments.
Accordingly, as you are an Australian resident for taxation purposes of an article of the country X Agreement applies and the pension payment and child allowance that you receive from the country X Government will form part of your Australian assessable income under subsection 6-5(2) of the ITAA 1997.