Edited version of private advice

Authorisation Number: 1051918131795

Date of advice: 4 November 2021

Ruling

Subject: Assessable government pension

Question

Is the pension you receive from the Commonwealth Government of Australia as a non-resident assessable in Australia?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

5 March 20XX

Relevant facts and circumstances

General Facts

You were born in the Country A.

You are a citizen of Country A.

You are a naturalised citizen of Australia.

In March 20XX you left Australia to travel to Country A with the intention to retiring in Country A.

You initially intended to return to Australia, but due to the COVID-19 pandemic, you have decided to settle in Country A.

Family and Social connections

You have a fiancé.

You do not have any dependents.

Your parents and siblings (your family) are citizens and residents of Australia.

Your family did not travel with you to Country A.

You hold a City A driver's license.

Medicare and the Australian Electoral Commission were informed of your departure from Australia.

You advised your health insurance provider to cancel or suspend your policy when you departed Australia.

When you travelled to Country A, you advised your financial institution that were a resident of Australia for income tax purposes and also provided a Country A postal address.

Accommodation and assets

When you were in Australia, you lived in a property for which you own.

You rented out the property to an unrelated party since 20XX.

You hold assets in the Country A including your main residence, saving and cheque account.

When you travelled to the Country A you retained your property but sold all of the furniture and other contents and your vehicle.

Employment and income

When you were in Australia, you were employed as a Senior Policy Analyst with the Department of Innovation, Industry, Science and Research.

You are receiving the Australian Government Comsuper pension.

You are not taxed in Country A on the Australian Government pension.

You are employed as a Quality Assurance Manager on a part-time basis in the Country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-5(3)

International Tax Agreements Act 1953 Schedule 2

International Tax Agreements Act 1953 Schedule 2, Article 18

International Tax Agreements Act 1953 Schedule 2, Article 19

International Tax Agreements Act 1953 Schedule 2A

Reasons for decision

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes all ordinary income derived from all Australian sources.

Pension payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.

In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one.

Schedule 2 to the Agreements Act contains the double tax convention between Australia and Country A (the Country Convention). Schedule 2A to the Agreements Act contains the Country A Protocol (the Country A Protocol). The Country A Convention and the Country A Protocol operate to avoid the double taxation of income received by Australian and Country A residents.

Article 18 of the Country A Convention specifically deals with the taxation of pensions and annuities income. This Article provides that, subject to Article 19 of the Country A Convention, Country A has the sole taxing rights over pensions and annuities income paid to an individual who is a resident of Country A.

Article 19 of the Country A Convention provides that wages, salaries and similar remuneration, including pensions, paid from the funds of the Australian government for labour or personal services performed as an employee in the discharge of governmental functions to an Australian citizen, shall be exempt by the other contacting State (Country A).

In your case, you are an Australian citizen, but considered a non-resident of Australia for income tax purposes. You are in receipt of a government pension from the Commonwealth Government of Australia. This payment is considered a pension from the Australian Government for services you performed as an employee in the discharge of government functions. Accordingly, under the provisions of Article 19 of the Country Convention, the Comsuper pension that you receive will be assessable under subsection 6-5(3) of the ITAA 1997.