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Edited version of your written advice
Authorisation Number: 1051204531327
Date of advice: 20 March 2017
Ruling
Subject: Assessability of pension income
Question
Is your government Retirement and Death Benefit (RDB) spouse's benefit assessable in Australia?
Answer
No.
This ruling applies for the following period(s)
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 2017
Relevant facts and circumstances
You are a foreign resident for tax purposes.
You are a Country Y citizen who resides in Country Y.
Your spouse was an employed by an Australian government agency.
You have been receiving government RDB spouse's benefits since your spouse's death a number of years ago.
Relevant legislative provisions
Taxation Administration Act 1953 Section Sch1-12-80
Income Tax Assessment Act 1997 Subsection 6-5(3)
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 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes all ordinary income derived from all Australian sources.
Pension payments are ordinary income for the purposes of subsection 6-5(2) and 6-5(3) of the ITAA 1997.
In determining liability to Australian tax on Australian sourced income received by a foreign resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty.
The tax treaty between Australia and Country Y contains Article XX which specifically deals with the taxation of pensions and annuities income. This Article provides that pensions paid to an individual who is a resident of Country Y, shall be taxed only in the Country Y.
Therefore, as you are a resident of Country Y, article XX of the tax treaty will apply and the RDB pension you receive will be exempted income in Australia and not assessable under section 6-5(3) of the ITAA 1997.