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Is the monthly pension which the taxpayer receives from an overseas pension fund exempt from tax pursuant to section 27CB of the Income Tax Assessment Act 1936 (ITAA 1936)?

No. The exemption under section 27CB of the ITAA 1936 applies to certain eligible termination payments (ETPs). In this case, the taxpayer is receiving a pension not an ETP. Therefore, the exemption does not apply.

The taxpayer's employment was terminated prematurely because of incapacity to work.

The taxpayer was granted a pension for an indefinite duration from an overseas pension fund due to the incapacity.

The taxpayer receives monthly pension payments from the overseas pension fund.

Subsection 27CB(1) of the ITAA 1936 states that if an ETP is made in relation to a taxpayer on or after 1 July 1994, and it includes an exempt amount such as a post June 1994 invalidity component, the taxpayer's assessable income does not include the exempt amount.

Subsection 27A(1) of the ITAA 1936 defines 'post-June 1994 invalidity component' as: 'in relation to an ETP, means so much of the ETP as consists of, or is attributable to, an invalidity payment made on or after 1 July 1994'.

'Invalidity payment' is defined in subsection 27A(1) of the ITAA 1936 as: 'in relation to a taxpayer, means an invalidity payment in relation to the taxpayer ascertained under section 27G'.

Section 27G of the ITAA 1936 states: 'Where - (a) an eligible termination payment is made in relation to a taxpayer in consequence of the termination of any employment of the taxpayer; and'.

The above demonstrates the initial requirement for section 27G of the ITAA 1936 to apply is for a taxpayer to receive an ETP. Subsection 27A(1) of the ITAA 1936 contains an exhaustive definition of 'eligible termination payment'. A pension payment does not fall within the definition of an ETP.

Therefore, section 27G of the ITAA 1936 does not apply to the pension payments and the exemption under section 27CB of the ITAA 1936 is not applicable.