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Edited version of your written advice
Authorisation Number: 1012909632077
Date of advice: 10 November 2015
Ruling
Subject: Foreign pension
Question and answer
Is your overseas social security pension assessable in Australia?
No.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You are a citizen of both Australia and Country Y.
You receive a social security pension from the Country Y Government.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Subsection 52-10(1A)
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Schedule X Article Z
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.
Pension income is ordinary income assessable under subsection 6-5(2) of the ITAA 1997.
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 Income Tax Assessment Act 1936 (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 Country Y Agreement is listed in section 5 of the Agreements Act.
The agreement between Australia and the Country Y operates to avoid the double taxation of income received by residents of Australia and Country Y.
Article Z of the Country Y agreement considers the tax treatment of Pensions.
The article gives taxing rights to the pension solely to Country Y.
Your social security pension is not taxed in Australia under article Z of the Country Y agreement and is not required to be declared in your Australian tax return.