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Is a Czech Republic government pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. A Czech Republic government pension received by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.

The taxpayer is a resident of Australia for income tax purposes.

The taxpayer receives a government pension from the Czech Republic.

The pension is a social security pension paid by the Czech Republic government.

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

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

In determining liability to Australian tax on foreign sourced income received by an Australian 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 ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited situations).

Schedule 40 to the Agreements Act contains the double tax agreement between Australia and the Czech Republic (The Czech Agreement). The Czech Agreement operates to avoid the double taxation of income received by Australian and Czech residents.

Article 18(1) of the Czech Agreement provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia.

Accordingly, as the taxpayer is a resident of Australia, the Czech Republic government pension is assessable under subsection 6-5(2) of the ITAA 1997.