ATO Interpretative Decision

ATO ID 2007/126

Income Tax

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Issue

Is the taxpayer, a resident of Australia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) on a war time persecution pension received from Austria?

Decision

No. The taxpayer, a resident of Australia, is not assessable under subsection 6-5(2) of the ITAA 1997 on a war time persecution pension received from Austria as it is exempt income under subsection 768-105(1) of the ITAA 1997.

Facts

The taxpayer is a resident of Australia.

The taxpayer is entitled to a pension from the Austrian government as a victim of National Socialist (Nazi) persecution during World War II.

The payment was not directly or indirectly from any of the taxpayer's associates.

Reasons for Decision

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident of Australia includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Pension payments are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not assessable income.

Section 768-105 of the ITAA 1997 provides an exemption for compensation payments arising out of Second World War.

Subsection 768-105(1) of the ITAA 1997 provides that a payment is exempt from income tax if:

(a)

you are an Australian resident at the time when it would otherwise be included in your assessable income; and

(b)

the payment is from a source in a foreign country; and

(c)

the payment is in connection with:

(i)

any wrong or injury; or

(ii)

any loss of, or damage to, property; or

(iii)

any other detriment;

suffered by you or another individual as a result of:

(iv)

persecution by the National Socialist regime of Germany during the National Socialist period; or

(v)

persecution during the Second World War by any other enemy of the Commonwealth or by a regime covered by subsection (3); or

(vi)

flight from persecution mentioned in subparagraph (iv) or (v); or

(vii)

participation in a resistance movement during the Second World War against forces of the National Socialist regime of Germany or against forces of any other enemy of the Commonwealth; and

(d)

the payment is not directly or indirectly from any of your associates.

The taxpayer is an Australian resident when the payment is made. The pension is paid by the Austrian Government to the taxpayer under a law of Austria. The pension was paid as a result of the persecution by the national Socialist regime of Germany during the National Socialist period. The payment was not directly or indirectly from any of the taxpayer's associates.

Therefore, the taxpayer's pension falls within the meaning of subsection 768-105(1) of the ITAA 1997 and is exempt from tax in Australia. Accordingly, the pension is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.

Amendment History

Year of income:  Year ended 30 June 2007

Legislative References:
Income Tax Assessment Act 1997
   subsection 6-5(2)
   subsection 6-15(2)
   section 768-105
   subsection 768-105(1)

Related ATO Interpretative Decisions
ATO ID 2002/592 (withdrawn - date of withdrawal effective from 14 September 2006)

Keywords
Austria
Exempt income
Foreign pension income
International tax
Lump sum payments in arrears

Siebel/TDMS Reference Number:  5683607; 1-7T3A63G

Business Line:  Small Business/Individual Taxpayers

Date of publication:  22 June 2007

ISSN: 1445-2782