Assessability of Norwegian pension by an Australian resident

Is an Australian resident taxpayer's Norwegian pension assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. An Australian resident taxpayer's Norwegian pension is assessable under section 27H of the ITAA 1936.

The taxpayer is an Australian resident for taxation purposes.

The taxpayer previously lived and worked in Norway. The taxpayer contributed to a pension fund during their period of employment in Norway. The taxpayer retired from that employment and now receives a regular Norwegian pension.

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) 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 ITAA 1936 which provides that annuities and superannuation pensions are included in assessable income.

In determining liability to Australian tax on foreign sourced income received by a 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 23 to the Agreements Act contains the double tax agreement between Australia and Norway ( the Norwegian Convention). The Norwegian Convention operates to avoid the double taxation of income received by Australian and Norwegian residents.

Article 18 of the Norwegian Convention provides that pensions and annuities paid to a resident of Australia shall be taxable only in Australia.

The taxpayer will therefore be assessable under section 27H of the ITAA 1936 on their Norwegian pension.