| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012827084282
Date of advice: 22 June 2015
Ruling
Subject: War disability pension
Question and answer
Is your Country A war disablement pension assessable in Australia?
No
This ruling applies for the following periods:
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced in:
On or after 1 June 20XX
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You have been living in Australia for 20 years and are a permanent resident.
In 20XX you were awarded a Country A war disability pension.
The pension is exempt from tax in Country A.
There is a tax treaty between Australia and Country A.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(2).
Income Tax Assessment Act 1997 Subsection 6-15(2).
Income Tax Assessment Act 1997 Section 11-15.
Income Tax Assessment Act 1997 Section 53-10.
International Tax Agreements Act 1953
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.
Subsection 6-15(2) of the ITAA 1997 provides that any income that is exempt income will not be included in assessable income.
Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 53-10 of the ITAA 1997 which deals with wounds and disability pension.
Item 5 of the table in section 53-10 of the ITAA 1997 provides that wounds and disability pensions are wholly exempt provided that the payment is of a kind specified in subsection 315(2) of the Income and Corporation Taxes Act 1988 (ICTA) of Country A.
Subsection 315(2) of the ICTA of Country A provides that income from wounds and disability pensions are exempt income if they are disablement or disability pensions granted to members of the naval, military or air forces of the Crown on account of medical unfitness attributable to or aggravated by naval, military or air-force service.
Taxation Ruling IT 2586 (entitled Income tax: Wounds and disability pensions paid by foreign government: whether exempt) states that wounds and disability pensions paid to Australian residents by a foreign government will be exempt from Australian tax if they fit into one of the categories of pensions described in section 365(2) of the ICTA of Country A.
In determining liability to Australian tax on foreign source income, it is relevant to consider not only the income tax laws but also any applicable double tax treaty contained in the International tax Agreements Act 1953 (the Agreements Act).
There is a double tax agreement in force between Australia and Country A (the Country A Agreement) which operates to avoid the double taxation of income received by residents of Australia and Country A.
Article 18 of the Country A Treaty provides that pensions including government pensions paid to residents of Australia are taxable only in Australia.
In your case, the war disablement pension from Country A is exempt under section 53-10 of the ITAA 1997as it is of the kind specified in subsection 315(2) of the ICTA of Country A. Consequently, as your pension is exempt income, it is not included as assessable income in accordance with subsection 6-15(2) of the ITAA 1997.