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Edited version of your written advice
Authorisation Number: 1013136843725
Date of advice: 6 December 2016
Ruling
Subject: Pension income
Question 1
Is your pension assessable in Australia?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are an Australian citizen and a Country X citizen.
You are a non-resident of Australia for tax purposes.
You lived in Australia permanently between 19XX and 20ZZ.
In 20ZZ you returned to live in Country X and advised all relevant Australian departments that you were leaving on a permanent basis.
You were employed by Organisation A from 19YY to 20ZZ.
You were enrolled in the Organisation A Pension scheme.
At age XX you intend to take a fortnightly pension from the Organisation A Pension scheme.
Your pension will be paid into a non-interest earning joint Australian bank account.
You will periodically transfer funds from the Australian account to your overseas bank account.
You do not have any other savings, investments or property in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 6-5(2),
Income Tax Assessment Act 1997 subsection 52-10(1A) and
International Tax Agreements Act 1953 section 4.
Reasons for decision
Summary
As you are a resident of Country X your pension shall only be taxable in Country X.
Detailed reasoning
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.
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 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).
The Country X Convention is the applicable agreement and operates to avoid the double taxation of income received by residents of Australia and Country X.
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 X Convention is listed in section 5 of the Agreements Act.
Article 17 of the Country X Convention advises that pensions and annuities paid to a resident of a Contracting state shall be taxable only in that State. As you are a resident of the Country X your pension shall only be taxable in Country X and no tax should be withheld from your pension payments.