Assessability of pension received from the government of Belgium by an Australian citizen

Is the Belgian government pension received by an Australian resident taxpayer assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The Belgian government pension received by an Australian resident taxpayer is assessable under section 27H of the ITAA 1936 as the taxpayer is a citizen of Australia.

The taxpayer is an Australian citizen and a resident of Australia for income tax purposes.

The taxpayer had contributed to a Belgian government pension scheme while employed by the government of Belgium.

The taxpayer receives a pension from the Belgian government pension scheme.

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, whether in or out of Australia, during the 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 pensions paid from a foreign superannuation fund or foreign scheme to provide superannuation benefits are included in assessable income.

In determining liability to Australian tax on foreign sourced income, 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 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 13 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Belgium (Belgian Agreement). The Belgian Agreement operates to avoid the double taxation of income received by Australian and Belgian residents.

Article 19 of the Belgian Agreement deals with government service pensions. Paragraph (2) of Article 19 of the Belgian Agreement provides that any pension paid to an individual in respect of services rendered in the discharge of governmental functions in Belgium will be taxable only in Australia if the recipient is a citizen and a resident of Australia.

As the taxpayer is an Australian citizen and a resident of Australia for income tax purposes, the Belgian government pension is assessable under section 27H of the ITAA 1936.