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Is a Swedish superannuation pension derived by a resident taxpayer assessable income under paragraph 27H(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The Swedish pension is assessable income under paragraph 27H(1)(a) of the ITAA 1936. The taxpayer is entitled to a foreign tax credit in Australia for Swedish income tax levied on the pension.

The taxpayer is an Australian resident for taxation purposes in accordance with Australian law and for the purposes of the Double Taxation Agreement (DTA) between Australia and Sweden. The taxpayer is a citizen of Sweden and receives a Swedish government service pension which has tax deducted at source.

Section 6-5 of the Income Tax Assessment Act 1997 provides that an Australian resident is required to declare all income derived directly or indirectly from all sources whether in or out of Australia. Paragraph 27H(1)(a) of the ITAA 1936 specifically states that a superannuation pension derived by a taxpayer is to be included in assessable income.

In determining liability to Australian tax on foreign source income, it is necessary to consider not only the income tax laws, but also any applicable DTA.

Schedule 17 of the International Tax Agreements Act 1953 (the Swedish Agreement) operates to avoid the double taxation of income received by Australian and Swedish residents. Paragraph 18(3) of the Swedish Agreement provides that a government pension paid by Sweden to a Swedish citizen who is a resident of Australia may be taxed by Sweden.

As the taxpayer is an Australian resident for taxation purposes, the taxpayer will be assessed under paragraph 27H(1)(a) of the ITAA 1936 in Australia on the pension income derived from Sweden.

However, paragraph 24(1) of the Swedish Agreement states that, subject to the law of Australia, a credit of Swedish tax paid may be allowable against Australian tax payable in respect of the pension.

Where the taxpayer has been levied Swedish income tax on the pension derived there, a credit will be allowable in Australia against Australian tax payable on that pension Note: With effect from 1 July 2008 the foreign tax credit system is replaced by the foreign income tax offset system. This ATO ID is still current