The Commissioner of Taxation has forwarded the following memorandum for advice:

A Victorian taxpayer claims to be exempt from income tax, as levied by the Federal Income Tax Assessment Act, so far as regards a pension of £422 paid to him from the guarantee and provident funds of a certain bank, as he considers that the source of pension is London.

Upon inquiry as to where the services which entitled him to a pension were rendered, the taxpayer stated that, with the exception of a few months in London, his service of 41 years was in Australia (roughly, two years in Queensland, three and a half in New South Wales, and the balance in Victoria; during the last-mentioned period his salary was debited half yearly to the London Office).

Inquiry of the bank discloses that the position is as follows:

Payments out of the funds are made only upon the authority of four administrators, three of whom reside in London. The payment of the claimant taxpayer is debited to an account kept in Australia for convenience, in common with all pensions, whether the beneficiaries reside now or during their service in England or Australia.

Section 10 (1) of the Income Tax Assessment Act prescribes that:

. . . income tax shall be levied . . . upon the taxable income derived directly or indirectly by every taxpayer from sources within Australia . . .

Possibly the length of Australian service rendered by this official has no bearing upon the derivation of pension, but if his claim is allowed no pensions paid by this particular bank can be assessed for income tax in Australia.

It does not appear to be unreasonable to contend that the pension is derived from Australia more than from anywhere else, on account of the services rendered in Australia by the pensioner.

As, however, the question is open to doubt, I should be glad to be favoured with your advice.

Section 14 (g) of the Act provides (inter alia) that income includes all allowances or gratuities granted to a taxpayer in relation to any employment or service of the taxpayer.

The Act, I think, treats the employment on which the pension is granted as the source of that pension for the purposes of the Act.

As the pensioner was employed practically for the whole of his period in Australia, in my opinion, the amounts received as pension are income within the meaning of the Income Tax Assessment Act 1915.

[Vol. 15, p. 93]