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Edited version of your written advice
Authorisation Number: 1012780139960
Ruling
Subject: Foreign pension
Question and Answer
Is your War Pension exempt from tax?
Yes.
This ruling applies for the following period(s)
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on
1 July 2013
Relevant facts and circumstances
You are a permanent resident of Australia.
You receive a War Pension from country A.
The pension is of a kind specified in 315(2) of the Income and Corporation Taxes Act 1988 of the country A.
Your pension is tax free in country A.
Assumption(s)
None made
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 11-5
Income Tax Assessment Act 1997 Section 53-10
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 6-15(2)
Income Tax Assessment Act 1936 Paragraph 23AD(3)(c)
Further issues for you to consider
Does Part IVA or any other anti-avoidance provision apply to this ruling?
The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.
Reasons for decision
Included in the list of exemption income in ITAA 1997 section 11-5 is section 53-10 of the ITAA 1997 which deals with wounds and disability pensions.
Section 53-10 of the ITAA 1997 provides that wounds and disability pensions (Item 5) are wholly exempt provided that the payment is:
(a) of a kind specified in sub-section 315(2) of the Income and Corporation Taxes Act 1988 of the country A; and
(b) similar in nature to payments that are exempt under Divisions 52 or 53 of the ITAA 1997.
Subsection The Act of country A provides that income from wounds and disability pensions are exempt from income tax if they are:
(a) wounds pensions granted to members of the naval, military or air forces of the Crown; or
(b) disablement or disability pensions granted to members, other than commissioned officers, of the naval, military or air forces on account of medical unfitness attributable to or aggravated by naval, military or air-force service.
Section 53-10 of the ITAA 1997 has equivalent wording to the repealed paragraph 23AD(3)(c) of the Income Tax Assessment Act 1936 (ITAA 1936). The application of paragraph 23AD(3)(c) of the ITAA 1936 is considered in Taxation Ruling IT 2586.
IT 2586 states that the Commissioner accepts that the exemption provided in paragraph 23AD(3)(c) of the ITAA 1936 applies to any such pensions payable by any government and the exemption applies irrespective of the age of the pensioner.
As the wording of paragraph 23AD(3)(c) of the ITAA 1936 is equivalent, in all relevant respects, to section 53-10 of the ITAA 1997 it is appropriate that the reasoning in IT 2586 should be applied to the interpretation of section 53-10 of the ITAA 1997.
In your case, the pension you receive is paid by reason of your disabilities arising out of wounds and injuries suffered while serving in the military. The pension is paid under subsection The Act of country A. Therefore your pension meets the requirement for exemption under section 53-10 of the ITAA 1997.
Accordingly, your War Pension is exempt from tax.