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Edited version of your written advice
Authorisation Number: 1012770226732
Ruling
Subject: Assessability of a foreign pension
Question and Answer
Is the pension you receive from the foreign country assessable in Australia?
No.
This ruling applies for the following period(s)
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commences on
1 July 2014
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You are an Australian citizen.
You receive a pension from the foreign country.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident for tax purposes includes ordinary income derived directly or indirectly from all sources during the income year.
In determining liability to tax on Australian sourced income received by a foreign taxpayer, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act).
Schedule X to the Agreements Act contains the tax treaty between Australia and the foreign country (the foreign country treaty). The foreign country treaty operates to avoid the double taxation of income received by residents of Australia and the foreign country.
Paragraph X of the foreign country treaty provides that pension payments by the foreign country to a resident of Australia for tax purposes shall only be taxed in the foreign country.
In your case, you are an Australian resident for tax purposes who receives a pension from the foreign country.
Therefore, the pension you receive from the foreign country is not included in your assessable income in Australia under section 6-5 of the ITAA 1997, but is subject to tax in the foreign country.