British forces pension

[Worma]

Hi

I can claim a UK forces pension in 2 years time. Does anyone know if the ATO will tax me on it?

[Ausvisitor]

It will be classed as taxable income, whether they tax you on it will depend on if it takes you over the tax threshold for income.

A forces pension is just a "better entitlement" UK governmental pension so it counts as income in the same way the state pension does

[Worma]

Thanks for the reply.

I was hoping you weren't going to say that but did figure that would be the answer. Greedy burgers.

[Marisawright]

8 hours ago, Worma said:

Thanks for the reply.

I was hoping you weren't going to say that but did figure that would be the answer. Greedy burgers.

It's income. Why would you expect it to get special treatment?   

[Jon the Hat]

3 hours ago, Marisawright said:

It's income. Why would you expect it to get special treatment?   

Heroes innit.

[shiner]

If the situation was reversed i.e. an Australian was a permanent resident of the UK, a war or government pension, would only be taxable in Australia. So why not the other way round for a Brit living in Austalia?

Edited November 9, 2023 by shiner

[Ken]

1 hour ago, shiner said:

If the situation was reversed i.e. an Australian was a permanent resident of the UK, a war or government pension, would only be taxable in Australia. So why not the other way round for a Brit living in Austalia?

No, the double taxation agreement works the same way for both countries. Pensions are taxed only in the country where the pensioner lives, so an Australian who is resident in the UK would only be taxed in the UK on his Australian pension. "Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State."

[shiner]

1 hour ago, Ken said:

No, the double taxation agreement works the same way for both countries. Pensions are taxed only in the country where the pensioner lives, so an Australian who is resident in the UK would only be taxed in the UK on his Australian pension. "Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State."

Final Paragraph.

What if my overseas pension is a Government Service pension?

If your overseas pension is taxable in the UK under UK domestic law and you are resident in the UK (including under the terms of a double tax agreement), you should be aware that Government Service pensions are often treated differently.

Government Service (or ‘civil service’) pensions are typically any pension paid by, or out of funds created by, a country (or political subdivision or local authority thereof) to an individual in respect of services to that country (or subdivision or local authority). You can find more information on what kind of pension falls into this category in HMRC’s technical guidance. They can include pensions for Armed Forces personnel, for example.

These pensions are usually considered under paragraph 2 of Article 19 of a double tax agreement, which generally says that such pensions are only taxable in the country which provides the pension unless the individual is a resident and national of the other country.

For example, an Italian national who is UK resident (for the purposes of the relevant double tax agreement) in receipt of an Italian ‘civil service’ pension will have that pension only taxed in Italy. If such an individual happened to be a UK national (and not an Italian national), such a pension would only be taxable in the UK.

[InnerVoice]

19 hours ago, shiner said:

Final Paragraph.

What if my overseas pension is a Government Service pension?

If your overseas pension is taxable in the UK under UK domestic law and you are resident in the UK (including under the terms of a double tax agreement), you should be aware that Government Service pensions are often treated differently.

Government Service (or ‘civil service’) pensions are typically any pension paid by, or out of funds created by, a country (or political subdivision or local authority thereof) to an individual in respect of services to that country (or subdivision or local authority). You can find more information on what kind of pension falls into this category in HMRC’s technical guidance. They can include pensions for Armed Forces personnel, for example.

These pensions are usually considered under paragraph 2 of Article 19 of a double tax agreement, which generally says that such pensions are only taxable in the country which provides the pension unless the individual is a resident and national of the other country.

For example, an Italian national who is UK resident (for the purposes of the relevant double tax agreement) in receipt of an Italian ‘civil service’ pension will have that pension only taxed in Italy. If such an individual happened to be a UK national (and not an Italian national), such a pension would only be taxable in the UK.

 

@shiner the third paragraph is clearer, stating pensions are only taxable in the country which provides the pension unless the individual is a resident and national of the other country. Assuming you're a resident and national of Australia, the first part of the sentence wouldn't apply to you.

[Ken]

53 minutes ago, InnerVoice said:

 

@shiner the third paragraph is clearer, stating pensions are only taxable in the country which provides the pension unless the individual is a resident and national of the other country. Assuming you're a resident and national of Australia, the first part of the sentence wouldn't apply to you.

You appear to have missed the word "usually" near the beginning of the third paragraph. You can't rely on what a DTA usually says, you must use what the actual DTA between the two countries says. I've already given you the wording of the DTA that exists between the UK and Australia. The words "(including government pensions)" were inserted for a reason. Not all DTA are the same.

Edited November 10, 2023 by Ken

[Ken]

20 hours ago, shiner said:

Final Paragraph.

What if my overseas pension is a Government Service pension?

If your overseas pension is taxable in the UK under UK domestic law and you are resident in the UK (including under the terms of a double tax agreement), you should be aware that Government Service pensions are often treated differently.

Government Service (or ‘civil service’) pensions are typically any pension paid by, or out of funds created by, a country (or political subdivision or local authority thereof) to an individual in respect of services to that country (or subdivision or local authority). You can find more information on what kind of pension falls into this category in HMRC’s technical guidance. They can include pensions for Armed Forces personnel, for example.

These pensions are usually considered under paragraph 2 of Article 19 of a double tax agreement, which generally says that such pensions are only taxable in the country which provides the pension unless the individual is a resident and national of the other country.

For example, an Italian national who is UK resident (for the purposes of the relevant double tax agreement) in receipt of an Italian ‘civil service’ pension will have that pension only taxed in Italy. If such an individual happened to be a UK national (and not an Italian national), such a pension would only be taxable in the UK.

We are discussing a hypothetical Australian who is UK resident not an Italian or the national of any other country. What the UK-Italy DTA says or what DTA usually say is irrelevant. All that matters is what the UK-Australia DTA says: "Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State." I think you'll find the words "(including government pensions)" may have been added to the sentence for the very reason that it is different from what a DTA "usually" says. But never rely upon what a DTA usually says, always read the specific DTA as they are all negotiated separately.

[InnerVoice]

51 minutes ago, Ken said:

You appear to have missed the word "usually" near the beginning of the third paragraph. You can't rely on what a DTA usually says, you must use what the actual DTA between the two countries says. I've already given you the wording of the DTA that exists between the UK and Australia. The words "(including government pensions)" were inserted for a reason. Not all DTA are the same.

Good to know for future reference - thanks.

[shiner]

5 hours ago, Ken said:

We are discussing a hypothetical Australian who is UK resident not an Italian or the national of any other country. What the UK-Italy DTA says or what DTA usually say is irrelevant. All that matters is what the UK-Australia DTA says: "Pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State." I think you'll find the words "(including government pensions)" may have been added to the sentence for the very reason that it is different from what a DTA "usually" says. But never rely upon what a DTA usually says, always read the specific DTA as they are all negotiated separately.

Fairy Nuff.

Does the same apply to Disability War Pensions?

[Ken]

On 10/11/2023 at 16:58, shiner said:

Fairy Nuff.

Does the same apply to Disability War Pensions?

Yes. They're not mentioned separately so will still count as a government pension as far as the DTA is concerned.

[shiner]

On 13/11/2023 at 11:11, Ken said:

Yes. They're not mentioned separately so will still count as a government pension as far as the DTA is concerned.

As a matter of interest how would you interpret the attached.

IT 2586 War Pensions.pdf

[Ken]

14 hours ago, shiner said:

As a matter of interest how would you interpret the attached.

IT 2586 War Pensions.pdf

That's interesting. It would appear that the ATO have accepted that some categories of foreign disability war pensions are exempt from tax. It doesn't change the operation of the DTA though. In fact, they would have to be taxable in Australia for them to be exempted. The exemption is however not part of the DTA so it's entirely up to the UK whether or not they tax Australian disability war pensions received by UK residents.