Assessability of Australian sourced superannuation pension paid to a resident of Poland

Is the taxpayer, a resident of Poland, assessable on their Australian sourced superannuation pension under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Even though the Australian sourced superannuation pension paid to a resident of Poland is assessable under subsection 6-10(5) of the ITAA 1997, Article 18 of Schedule 36 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the pension income is not taxable in Australia.

The taxpayer is a resident of Poland and is a non-resident of Australia for income tax purposes.

The taxpayer receives a superannuation pension from Australia.

Subsection 6-10(5) of the ITAA 1997 provides that a non resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source.

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 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 36 to the Agreements Act contains the double tax agreement between Australia and the Republic of Poland (the Polish Agreement). The Polish Agreement operates to avoid the double taxation of income received by Australian and Polish residents.

Article 18 of the Polish Agreement deals with pensions and annuities. Paragraph (1) of Article 18 of the Polish Agreement provides that pensions paid to a resident of Poland shall be taxable only in Poland.

Consequently, as the taxpayer is a resident of Poland, Article 18 of the Polish Agreement applies and the pension income is not taxable in Australia. The pension income is therefore not assessable under subsection 6-10(5) of the ITAA 1997.