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Edited version of your written advice
Authorisation Number: 1051412696644
Date of advice: 13 August 2018
Ruling
Subject: Foreign income - pension
Question
Is your pension received from Country A assessable in Australia?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
In 20XX you and your spouse arrived from Country A to take up residence in Australia.
You and your spouse are permanent residents of Australia and have applied for citizenship.
You are a resident of Australia for taxation purposes.
You currently receive a pension payment from Country A following your retirement from employment in that Country.
The pension payments include contributions from your after-tax income in Country A.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Subsection 6-5(4)
International Tax Agreements Act 1953 Schedule 3 Sch3
International Tax Agreements Act 1953 Sch3 - Art 18
International Tax Agreements Act 1953 Sch3 – Art 23
Reasons for decision
Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary and statutory income they derive directly or indirectly from all sources, whether in or out of Australia during the income year.
In determining liability to Australian tax of foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act).
Schedule 3 to the Agreements Act contains the tax treaty between Australia and Country A (the Country A Convention). The Country A Convention operates to avoid the double taxation of income received by Australian and residents of Country A.
Article 18 of the Country A Convention provides that pensions and annuities paid to a resident of Australia may be taxed in Australia. However, the pension received from Country A is also subject to tax in Country A but the rate of tax is not to exceed 15 per cent.
Paragraph (1) of Article 23 of the Country A Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in Country A will be allowed against Australian tax paid on income from Country A sources.
In your case, as you are an Australian resident for income tax purposes, your pension received from Country A is included in your assessable income under section 6-5 of the ITAA 1997 and a foreign tax offset will be allowed for tax paid in Country A.