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Edited version of your written advice
Authorisation Number: 1012820124470
Date of advice: 15 June 2015
Ruling
Subject: Foreign Pension Income
Question and Answer
Is the pension you are receiving from a foreign country exempt from income tax in Australia?
No
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
You are an Australian citizen and are a citizen of a foreign country.
You are a resident of Australia for income tax purposes.
You receive a pension from the foreign country Armed Forces Pensions Scheme.
None of the payments listed under subdivision 52-B of the Income Tax Assessment Act 1997 (ITAA 1997) are relevant to your foreign pension.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 27H
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreement Act 1953 Section 4
International Tax Agreement Act 1953 Section 5
Reasons for decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) provides that annuities and pensions paid from a foreign superannuation fund or foreign pension scheme to provide superannuation benefits are included in assessable income.
In determining ability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act).
Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that the 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 Foreign Country Convention is listed in section 5 of the Agreements Act.
Article 17 of the Foreign Country Convention provides that pensions (including government pensions) paid to a resident of Australia shall be taxable only in Australia.
In your case, you argued that based on section 53-20 of the ITAA 1997, some payments similar to payments under the Veteran's Entitlement Act 1986 that are exempt under subdivision 52-B of the ITAA 1997, made by the Government of the foreign country, are exempt from income tax in Australia.
However, you have confirmed that none of the payments listed under subdivision 52-B of the ITAA 1997 are relevant to your foreign pension.
As you are a resident of Australia for taxation purposes, the foreign country pension you are receiving is not exempt from income tax in Australia. It is assessable under section 27H of the ITAA 1936.