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Edited version of private advice
Authorisation Number: 1012660589386
Ruling
Subject: Assessable income
Question
Is the pension you receive from overseas assessable income in Australia?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2008
Relevant facts and circumstances
You arrived in Australia and became a citizen.
You receive a pension from an overseas country (the pension).
The pension is deposited into your account in Australia monthly.
Relevant legislative provisions
Subsection 6-5(1) of the Income Tax Assessment Act 1997
Subsection 6-5(2) of the Income Tax Assessment Act 1997
Section 4 of the International Tax Agreements Act 1953
Section 5 of the International Tax Agreements Act 1953
Reasons for decision
Under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997), your assessable income includes income according to ordinary concepts, which is called ordinary income.
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident for taxation purposes includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia.
Indicators of ordinary income include the receipt being:
• received periodically and regularly
• relied upon or expected
• earned
• for the replacement of income.
In your case, you receive a pension into your account on a monthly basis. It therefore has the traits of being periodic and regular, as well as expected. As it is a pension that is paid from funds accumulated from prior work it could also be said to be for the replacement of income. Accordingly, the pension is ordinary income and assessable income.
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 relevant agreement is listed in section 5 of the Agreements Act.
The relevant agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The relevant agreement operates to avoid the double taxation of income received by residents of Australia and the overseas country.
Article 17 of the relevant agreement advises that pensions paid to a resident of Australia shall be taxable only in Australia.
In your case, you are an Australian citizen and resident. Accordingly, the pension you receive from the overseas country is taxable only in Australia.
Based upon the above discussion, the pension you received from the overseas country is assessable income in Australia.