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Edited version of private advice
Authorisation Number: 1051972709279
Date of advice: 12 April 2022
Ruling
Subject: Foreign pension
Question 1
Does Australia have the sole taxing rights on your pension paid by the country Y government?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 2021
The scheme commences on:
1 July 2020
Relevant facts and circumstances
You are a resident of Australia for taxation purposes.
You receive an aged pension from the country Y government.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
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.
Pension income is ordinary income assessable under subsection 6-5(2) of the ITAA 1997.
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.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (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 country Y agreement is listed in section 5 of the Agreements Act.
Article 18 of the country Y agreement considers pensions.
It states:
1. Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State.
This means that Australia has the sole taxing rights on your age pension received from the country Y government.
This pension is required to be declared in your Australian tax return.