Issue
Is a pension received by a resident taxpayer from the United Kingdom (UK) assessable under section 26AA of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes, a pension received by a resident taxpayer from the UK is assessable under section 26AA of the ITAA 1936.
Facts
The taxpayer was a resident of the UK. The taxpayer retired from his employment and, prior to 1 July 1983, started to receive a monthly superannuation pension.
The taxpayer immigrated to Australia soon after retirement and became a resident of Australia for tax purposes.
Reasons for Decision
Article 14, Schedule 1 to the International Tax Agreements Act 1953 provides that any pension derived from sources within the UK by an individual who is a resident of Australia shall be exempt from tax in the UK.
Section 26AA of the ITAA 1936 includes in a taxpayer's assessable income the amount of any annuity received, excluding the part of the annuity that represents the undeducted purchase price. The application of this section is restricted to annuities that were first payable before 1 July 1983.
The taxpayer is a resident of Australia. As a resident, the pension is assessable income in Australia in accordance with section 26AA of the ITAA 1936. The amount of pension to be included in assessable income is the pension amount excluding the amount that represents the undeducted purchase price.