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Edited version of your written advice
Authorisation Number: 1051191010899
Date of advice: 14 February 2017
Ruling
Subject: Assessability of a foreign pension.
Question and answer
Is the foreign pension you received assessable in Australia?
No.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You receive a pension from Country X.
The pension is not taxable in Country X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Section 4
International Tax Agreements Act 1953 Section 5
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.
However, 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 X agreement is listed in section 5 of the Agreements Act.
The agreement between Australia and Country X operates to avoid the double taxable of income received by residents of Australia and Country X.
An article of the agreement with Country X considers the tax treatment of pensions and provides that pensions and other similar periodic payments paid to a resident of Australia shall only be taxable in Australia. However, such income paid from Country X shall not be taxed in Australia to the extent it would not be subject to tax in Country X if the recipient were a resident of Country X.
In your situation, you are in receipt of a pension from Country X which is not taxable in Country X.
Therefore, your pension is not assessable in Australia.