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Edited version of private advice
Authorisation Number: 1051585017284
Date of advice: 24 September 2019
Ruling
Subject: Disability pension
Question
Is your disability pension you receive from Country A assessable in Australia?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You qualified for and receive a disability pension from Country A, as you were paying into the relevant compulsory National insurance scheme, and you were previously employed in Country A and became disabled.
You worked in in the private sector in Country A, and as you did not work for the Government in Country A, your pension is not a Government service pension.
The pension is paid from Country A's social security system.
Country A's taxation authorities have withheld tax from your disability pension payments.
You have been declaring your disability pension received from Country A as assessable foreign source income in your Australian income tax returns.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
International Tax Agreements Act 1953 Paragraph Sch5-Art18(1)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) advises that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
A disability pension is ordinary income for the purposes of section 6-5(2) of the ITAA 1997.
In determining liability to Australian tax on 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).
There is a tax treaty between Australia and Country A, where your pension is sourced. The treaty operates to avoid the double taxation of income received by residents of Australia and that country.
Part of the treaty provides that pensions and annuities (apart from government service pensions) paid to a resident of Australia shall be taxable only in Australia.
Therefore, your disability pension received from Country A, not being from government service, is only taxable in Australia under subsection 6-5(2) of the ITAA 1997.
You will need to include this income in the supplementary section marked Foreign source income and foreign assets or property.