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Edited version of private advice
Authorisation Number: 1012655257113
Ruling
Subject: Health pension
Question
Is the disability pension that you receive from Country X assessable in Australia?
Answer
Yes
This ruling applies for the following periods:
30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You sustained injuries at your work place in Country X.
The injury resulted in you no longer being able to work at full capacity.
You receive ill health pension from Country X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Schedule 1
International Tax Agreements Act 1953 Schedule 1 Article 17
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.
A disability pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the domestic tax law but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act).
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates the Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one.
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 The Country X.
The relevant article of the Country X agreement provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia.
Therefore, the pension you are receiving from the Country X is assessable in Australia under subsection 6-5(2) of the ITAA 1997.