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Edited version of private advice
Authorisation Number: 1012648899429
Ruling
Subject: Maintenance payments received from a foreign source
Question
Are the regular maintenance payments you receive from your ex-spouse assessable income?
Answer
No.
This ruling applies for the following periods
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commences on
1 July 2014
Relevant facts and circumstances
You and your ex-spouse divorced.
At the time you and your ex-spouse lived in Country X.
The courts imposed a court order requiring your ex-spouse to pay you a regular maintenance payment.
You returned to Australia in the 200X income year and your ex-spouse continues to pay you a regular maintenance payment.
You are an Australian resident for taxation purposes.
Your ex-spouse is taxed on the money in Country X prior to making payments to you.
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 51-30
Income Tax Assessment Act 1997 Section 51-50
Reasons for decision
Section 6-5 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. However, an amount will not be included in assessable income if the amount is exempt income.
Section 51-30 of the ITAA 1997 provides that periodic payments in the nature of maintenance are exempt from income tax as long as they meet the requirements of section 51-50 of the ITAA 1997. Maintenance payments are those made for the support of a spouse or children.
Section 51-50 of the ITAA 1997 specifies that maintenance payments are exempt from income tax only if they are made:
• by an individual (the maintenance payer) or are attributable to a payment made by the maintenance payer; and
• to an individual who is or has been the maintenance payer's spouse; or
• to or for the benefit of an individual who is or has been,
• a child of the maintenance payer; or
• a child who is or has been a child of an individual who is or has been a spouse of the maintenance payer.
In determining liability to tax on foreign sourced income received by an Australian resident taxpayer it is necessary to consider not only the Australian income tax laws but also any applicable double tax agreement that is cited in the International Tax Agreements Act 1953.
Country X and Australia have signed a double tax agreement (the agreement).
While spousal maintenance payments are not specifically addressed in the agreement, the taxation of these payments is covered by Article 20 of the agreement under other income. Article 20 states that other income that is beneficially owned by a resident of a country to the agreement will be taxed in the resident's country regardless of where that income is sourced. This means that these payments will only be taxed in Australia if the legislation provides for it.
You receive regular maintenance payments, which are effectively attributable to payments made by your ex-spouse from their taxable income. The payments are therefore exempt from income tax in accordance with section 51-50 of the ITAA 1997 and are not assessable income under section 6-5 of the ITAA 1997.