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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?

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 subparagraph 23(kca)(iii) of the Income Tax Assessment Act 1936 (ITAA 1936).

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.

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.

Paragraph 23(kca) of the ITAA 1936 provides that certain pensions, annuities and allowances will be exempt. Subparagraph 23(kca)(iii) of the ITAA 1936 provides that a pension, annuity or allowance will be exempt where it is made under a law, other than a law of the Commonwealth, State or Territory and: • relates to, or takes into account, the persecution, during World War II of the recipient or another person by forces of an enemy of the Commonwealth, or flight from such persecution (subsubparagraph 23(kca)(iii)(A) of the ITAA 1936); or • relates to a disability arising out of the participation of the recipient or another person in a resistance movement during World War II against forces of an enemy of the Commonwealth (subsubparagraph 23(kca)(iii)(B) of the ITAA 1936).

The pension paid to the taxpayer is made under a law of Austria. The pension was paid as a result of the persecution by forces of an enemy of the Commonwealth (ie the Nazis) of the taxpayer during World War II.

Therefore, the taxpayer's pension falls within the meaning of subparagraph 23(kca)(iii) of the ITAA 1936 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.