Exempt income - UK War Widows Supplementary Pension

Is the United Kingdom (UK) War Widows Supplementary Pension received by the taxpayer, exempt income under section 53-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The UK War Widows Supplementary Pension is exempt income under section 53-20 of the ITAA 1997.

The taxpayer is a resident of Australia.

The taxpayer's spouse was a member of the UK armed forces who was discharged at the end of the Second World War.

The taxpayer's spouse has since died as a result of a condition contracted while a member of the armed forces.

The taxpayer is entitled to receive a War Widows Pension and a War Widows Supplementary Pension from the UK War Pensions Agency.

The War Widows Pension is paid to the spouses and children of members of the UK armed forces killed whilst serving in the armed forces or who died later as a result of injury sustained during that service.

The War Widows Supplementary Pension is linked to the War Widows Pension entitlement and is payable to widows of UK servicemen whose service terminated before 31 March 1973.

Subsection 6-5(2) of the 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 6-15 of ITAA 1997 provides that if an amount is exempt income, it will be excluded from assessable income. Section 6-20 of the ITAA 1997 specifies that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law.

Section 53-20 of the ITAA 1997 provides that payments made by the Government of the United Kingdom are exempt from tax in Australia if the payments are similar to payments made under the Veterans' Entitlements Act 1986 that are exempt under Subdivision 52-B of the ITAA 1997 or payments similar to payments that are made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 and are exempt under Subdivision 52-C of the ITAA 1997.

Section 52-65 of the ITAA 1997 contains a list of pensions or other payments made under the Veterans' Entitlements Act. Item 10.1 lists pensions for defence-caused death or incapacity as exempt.

The War Widows Pension the taxpayer receives from the United Kingdom is similar to the pension for defence-caused death or incapacity paid under the Veterans' Entitlements Act. The Australian pension is listed as an exempt payment in Subdivision 52-B of the ITAA 1997. Therefore, the UK War Widows pension is exempt from tax in Australia under section 53-20 of the ITAA 1997.

As the War Widows Supplementary Pension received by the taxpayer is an additional component of the UK War Widows Pension it is also an exempt payment under Subdivision 52-B of the ITAA 1997 and does not form part of the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.