Double tax - Assessability of an Australian sourced pension received by a resident of Switzerland

Is the taxpayer, a resident of Switzerland, assessable on their Australian sourced superannuation pension under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The Swiss resident taxpayer is not assessable on their Australian sourced superannuation pension under section 6-5 of the ITAA 1997 because of the operation of the Double Tax Agreement between Australia and Switzerland.

The taxpayer is a resident of Switzerland.

The taxpayer received an Australian sourced superannuation pension from which no Australian tax was deducted.

Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non-resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non-resident's assessable income under subsection 6-10(5) of the ITAA 1997.

Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that annuities and superannuation pensions are included in assessable income.

In determining liability to Australian tax on Australian sourced income received by a non-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 ( the Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions).

Schedule 15 to the Agreements Act contains the double tax agreement between Australia and Switzerland (the Swiss Agreement). The Swiss Agreement operates to avoid the double taxation of income received by Australian and Swiss residents.

Article 18 of the Swiss Agreement provides that an Australian pension received by a Swiss resident is subject to tax in Switzerland.

The taxpayer is a resident of Switzerland for income tax purposes and receives an Australian sourced superannuation pension. Article 18 of the Agreements Act operates to tax the superannuation pension in Switzerland only and therefore is not included in the assessable of the taxpayer under section 6-5 of the ITAA 1997.