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Edited version of your written advice
Authorisation Number: 1012940289449
Date of advice: 22 January 2016
Ruling
Subject: Overseas pension
Question and answer:
Is the retirement grant you received from Country B assessable income in Australia?
Yes
This ruling applies for the following periods:
Year ended 30 June 20YY
The scheme commenced on
1 July 20XX
Relevant facts:
You received a pension from an overseas pension fund during the 20XX-YY income year.
You received an overseas retirement grant which is not taxable in that country.
The pension back payment made to you related to the 20XX-YY income year.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Section 27H
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Section 5
International Tax Agreements Act 1953 Schedule B Article xx
Reasons for decision
Assessability of pension and retirement grant
Under section 6-5 (Income Tax Assessment Act 1997 (ITAA 1997)) your assessable income, as resident of Australia, must include income derived from all sources, whether in or out of Australia, during the income year. Section 27H (Income Tax Assessment Act 1936 (ITAA 1936)) provides for assessable income to include annuities and superannuation pensions.
As you are in receipt of an overseas Pension the provisions of the International Tax Agreements Act 1953 must be considered and have effect notwithstanding anything inconsistent with those provisions in the Act.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the 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 B Agreement is listed in section 5 of the Agreements Act.
The Country B agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country B agreement operates to avoid the double taxation of income received by residents of Australia and Country B.
Under Article XX of the agreement states that:
Pensions (including government pensions) and annuities paid to a resident of Contracting State shall be taxable only in that State.
This means that, as you are a resident of Australia, the pension you are receiving from Country B is exempt from tax in that country and is only taxable in Australia. As your Country B pension must be included in your assessable income for Australian tax purposes the retirement grant and back payment must also be included as assessable income.
The lump sum pension payment is assessable income as the underlying pension is assessable income. Consequently, the lump sum pension payment must be declared in your Income Tax Return of the year in which this amount was received that is 20XX-YY.