Assessability of an Australian superannuation pension received by a resident of the United Kingdom

Is the Commonwealth Superannuation Scheme (CSS) pension received by a non-resident taxpayer assessable income under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. The CSS pension received by the non-resident taxpayer is not assessable income under subsection 6-10(5) of the ITAA 1997.

The taxpayer is a resident of the United Kingdom (UK) and a non-resident of Australia for income tax purposes.

The taxpayer receives a pension from the CSS, a superannuation fund, which is a resident of Australia for income tax purposes.

The taxpayer pays tax in the UK on the pension income.

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.

Subsection 27H(1) of the ITAA 1936 provides that the assessable income of a taxpayer includes the amount of any annuity derived by the taxpayer during the year of income and the amount of any payment made to the taxpayer as a supplement to an annuity. Subsection 27H(4) of the ITAA 1936 defines annuity to include a superannuation pension.

In determining liability to tax on Australian sourced income received by a non resident taxpayer, 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.

Schedule 1 to the Agreements Act contains the double tax convention and notes between Australia and the United Kingdom of Great Britain and Northern Ireland (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents.

Article 17 of the 2003 UK Convention deals with pensions and annuities. Article 17(1) of the 2003 UK Convention provides that pensions, including government pensions, paid to a resident of UK shall be taxable only in the UK.

Accordingly, the CSS pension received by the UK resident taxpayer will not be assessable income under subsection 6-10 (5) of the ITAA 1997.