Edited version of private advice

Authorisation Number: 1052018834914

Date of advice: 16 August 2022

Ruling

Subject: International - foreign sourced income (annuity)

Question

Is your annuity payment sourced in the Country A assessable in Australia?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You have permanently relocated to Australia from Country A.

You are an Australian resident for taxation purposes.

You are a dual citizen of Australia and Country A.

You made contributions to a retirement plan which is not an employer sponsored plan.

The plan provides retirement benefits through the purchase of an annuity contract. You receive periodical annuity payments from an insurance company.

The insurance company is a resident of Country A.

A minimum amount determined by an actuary must be taken each year which can be paid to you at a determined frequency in that year.

The retirement plan is not a superannuation fund for Australian tax law purposes.

Further contributions to the fund cannot be made after retirement.

Your entitlements can be taken as a lump sum at any time.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 27H

Income Tax Assessment Act 1997 Section 6-10(4)

Income Tax Assessment Act 1997 Section 10-5

International Tax Agreements Act 1953 Section 4

International Tax Agreements Act 1953 Section 5

Reasons for decision

Subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes statutory income from all sources, whether in or out of Australia.

Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 which provides that annuity amounts are included in assessable income.

In determining liability to Australian tax on foreign sourced income received by a resident taxpayer, 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. The Country A Convention is contained in Section 5 of the Agreements Act.

Article 18(3) of the Country A Convention provides that annuities paid to an individual who is a resident of Australia shall be taxable only in Australia.

Article 18(5) of the Country A Convention defines 'annuities' as stated sums paid periodically at stated times during life, or during a specified or ascertainable number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered or to be rendered).

The annuity received by you from the retirement plan comes within the definition of an 'annuity' under paragraph (3) of Article 18 of the Country A Convention.

As you are a resident of Australia for income tax purposes, Article 18 of the Country A Convention applies and the annuity income received from Country A will form part of your assessable income under subsection 6-10(4) of the ITAA 1997.