Issue
Is the taxpayer, a resident of France, assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) on an Eligible Termination Payment (ETP) received from a complying Australian superannuation fund?
Decision
Yes. The taxpayer, a resident of France, is assessable under subsection 6-10(5) of the ITAA 1997 on those components of the ETP received from a complying Australian superannuation fund that are assessable under sections 27A to 27H of the Income Tax Assessment Act 1936 (ITAA 1936).
Facts
The taxpayer is a resident of France and non resident of Australia for income tax purposes.
After retirement, the taxpayer receives as a lump sum ETP from a complying Australian superannuation fund.
Reasons for Decision
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 are ETPs dealt with under sections 27A to 27H of the ITAA 1936 which provide that various components of an ETP are included in assessable income.
The taxpayer is a resident of France, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and French Republic and the protocols to that agreement (the French Agreement) contained in Schedules 11 and 11A to the Agreements Act must be considered in determining whether the pension received by the taxpayer is taxable in Australia.
Section 9A and section 9B of the Agreements Act gives the French Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and ITAA 1997 must be read as one with the Agreements Act. Subsection 4(2) of the Agreements Act provides that in the event of inconsistent provisions, the Agreements Act overrides the ITAA 1936 and ITAA 1997 (except in some limited situations).
Article 17(1) of the French Agreement (substituted by Article 6 of the protocol to the French Agreement) provides that pensions and annuities paid to a resident of France shall be taxable only in France.
Article 17(2) of the French Agreement provides that the term 'annuity' means any stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make payments in return for adequate and full consideration in money or money's worth.
Article 17(1) of the French Agreement will not apply as the ETP is not a pension, or an annuity as defined in Article 17(2) of the French Agreement.
Other articles of the French Agreement do not deal with the taxation of an ETP.
As the complying superannuation fund that paid the ETP is established and controlled in Australia, the source of the payment is Australia.
The amount of the ETP included in assessable income under sections 27A to 27H of the ITAA 1936 is therefore statutory income for the purposes of subsection 6-10(5) of the ITAA 1997.
As the taxpayer is a non resident for income tax purposes and the ETP is from an Australian source, that component of the ETP assessable under sections 27A to 27H of the ITAA 1936 will form part of the taxpayer's assessable income under subsection 6-10(5) of the ITAA 1997.