Assessability of Australian sourced superannuation pension income derived by Austrian resident

Is the Australian sourced Commonwealth Superannuation Scheme (CSS) pension income derived by a resident of Austria assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No. Although the Australian sourced CSS pension paid to a resident of Austria is ordinarily assessable under subsection 6-5(3) of the ITAA 1997, Article 19(2)(b) of the Austrian Agreement contained in Schedule 27 of the International Tax Agreements Act 1953 (the Agreements Act) applies, and the pension is not taxable in Australia.

The taxpayer is a resident of Austria for taxation purposes.

The taxpayer is a citizen of Austria.

The taxpayer receives a pension from the CSS in respect of the taxpayer's employment with the Australian Public Service.

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.

Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997.

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 1997 so that those Acts are read as one.

Schedule 27 to the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income derived by Australian and Austrian residents and also to prevent fiscal evasion with respect to taxes on income.

Paragraph (2) of Article 19 of the Austrian Agreement deals with Government Service pensions. Subparagraph (2)(a) of Article 19 states that a pension paid by Australia in respect of services rendered to Australia shall be taxable in Australia. This includes ComSuper pension payments, such as the CSS pension payments, to a person who was employed in the Australian Public Service. However, subparagraph (2)(b) of Article 19 provides that such pensions shall be taxable only in Austria if the individual is a resident of, and a citizen or national of Austria.

Accordingly, as the taxpayer is a resident and citizen of Austria, the pension income derived by the taxpayer from the CSS in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.