Edited version of private advice

Authorisation Number: 1052393075693

Date of advice: 04 June 2025

Ruling

Subject: Assessable income

Question

Is the income you derive from a Country B police pension assessable in Australia from DD MM 20XX?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On DD MM 19XX, you were born in Country B

You are not a tax resident of Country B.

Between 19XX - 19XX, you were employed in the Country B military service.

From DD MM 19XX to DD MM 19XX, you were employed as a police office in Country B.

On DD MM 19XX, you immigrated to Australia and became a permanent tax resident.

On DD MM 20XX, you became an Australian citizen.

From DD MM 20XX to DD MM 20XX, you were employed as a police officer in Australia.

From DD MM 20XX to DD MM 20XX, you were employed as a police officer for the Australian Federal Police.

On DD MM 20XX, you retired from all employment.

On DD MM 20XX, you began receiving payments in monthly instalments from your Country B police pension.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-5(2)

Income Tax Assessment Act 1997 section 6-10

Income Tax Assessment Act 1997 section 10-5

Income Tax Assessment Act 1936 section 27H

International Tax Agreements Act 1953 section 4

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer who is a resident of Australia includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (section 6-15 of the ITAA 1997).

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997).

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 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income. This section states that annuities first payable on or after 1 July 1983 are included in the assessable income of the taxpayer, excluding the undeducted purchase price if the annuity was purchased.

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 double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Country B pension

The tax treaty with Country B is the agreement which operates to avoid the double taxation of income received by residents of Australia and Country B by allocating taxing rights between the two countries.

The Country B Agreement provides that pensions and annuities paid to an Australian resident are taxable only in Australia.

In your case, you immigrated to Australia on DD MM 20XX and therefore, will be a resident of Australia for taxation purposes on the date of arrival. As such, your pension payments from Country B are assessable income under section 27H of the ITAA 1936, and forms part of your assessable income under section 6-10 of the ITAA 1997. As an Australian tax resident, pensions that you receive from Country B will be taxable only in Australia.