Edited version of your written advice

Authorisation Number: 1051481046354

Date of advice: 14 February 2019

Ruling

Subject: Income

Question and answer

Are your payments from the foreign country assessable in Australia?

Yes

This ruling applies for the following period(s)

Income year ended 30 June 2015

Income year ended 30 June 2016

Income year ended 30 June 2017

Income year ended 30 June 2018

Income year ending 30 June 2019

Income year ending 30 June 2020

Income year ending 30 June 2021

Income year ending 30 June 2022

Income year ending 30 June 2023

The scheme commences on

1 July 2014

Relevant facts and circumstances

You are a citizen of the foreign country.

You have been a resident of Australia for taxation purposes from the from the 2014 income year on-wards.

You are a former professional sportsperson. You played the majority of your professional career in the foreign country.

You also played several seasons professionally in Australia before your retirement.

You have been a tax resident of Australia since a few years ago.

Whilst playing in the foreign country it is compulsory for players to contribute a portion of their gross earnings to a specified fund (the Fund). This scheme, set up in 19XX, provides a tax efficient system for sports people to set aside funds for the period after their sport career has ended. Under the pension scheme once your active sportsperson career ends you receive monthly benefit payments from your individual fund. The amount and duration of the benefits depends on the individual fund balance.

You receive regular payments from the Fund.

The payments are not taxable in the foreign country and accordingly the Fund does not withhold tax from them.

The Fund’s regulations state that:

● the members can access their benefits only in the form of monthly pension;

● the pension is paid to a member only on retirement or to their partner or child on their death before retirement;

● the entitlements from this pension scheme cannot be commuted, sold or waived or formally or actually become subject of security.

The Fund is a scheme for the payment of benefits in the nature of superannuation upon retirement or death and therefore a pension fund for our ATO purposes.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

International Tax Agreements Act 1953 Section 4

Reasons for Decision

Assessable income

Section 6-5 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.

Salary and wages, as well as interest earned on bank accounts, are examples of ordinary income that would be generally be included in a resident Australian taxpayer’s assessable income.

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.

The foreign country Double Tax Agreement

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 agreement between Australia and the foreign country for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, and Protocol (Australian Treaty Series 1976 No 24) (the foreign country Agreement) listed in section 5 of the Agreements Act.

The foreign country Agreement is located on the Austlii website (austlii.edu.au) in the Australian Treaties Series database. The foreign country Agreement is operates to avoid the double taxation of income received by residents of Australia and the foreign country.

Based upon the agreement between Australia and the foreign country for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, and Protocol (Australian Treaty Series 1976 No 24) we quote Article 18, which deals with pensions and annuities:

(1) Pensions, including pensions provided under the provisions of a public social security system, but not including pensions to which Article 19 applies, paid to a resident of one of the States, and annuities so paid, shall be taxable only in that State.

(2) The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth.

You are a resident of Australia for taxation purposes and the payments you receive from the Fund are pension payments. Therefore, they are assessable in Australia under Article 18 of the foreign country Agreement.