Australia has a tax treaty with Italy to prevent double taxation. As part of the agreement, an Italian resident in Australia who receives income from Italy, can request the Italian taxation authorities to reduce their tax deduction or to exempt them completely from paying tax. They can do this by lodging a tax relief form or a certificate of residence to INPS (form called EP-I/1). With patronato INAS who can assist the pensioner to check that their Italian pension is tax exempt or assist them to obtain a certificate of residence in order to apply for the the exemption.
Issues concerning the Australian taxing of certain Italian pensions received by Australian residents are clarified under taxation ruling IT2554.
For the purpose of establishing if part of the pension received should be excluded from the pensioner’s taxable income, INAS is recognised to be a foreign pension fund. Therefore a component of such payment is to be excluded from the taxable income (undeducted purchase price).
It is acknowledged that some Italian pension recipients who have retired in Australia may have difficulty in establishing with complete accuracy the total amount of the contributions which they made in Italy in past years and which constitute the “undeducted purchase price” of their pension.
In recognition of the difficulties experienced by pensioners in obtaining information relating to their contributions paid to INPS, it has been decided to accept the portion of the pension identified by INPS as being derived from the contributions made by the pensioner (reduced by 10% to reflect the interest in that component of the pension) as annual exclusion amount, this is the amount which may be excluded from the pensioner’s assessable income in any given year of income.
In order to calculate the component of taxable income, it’s necessary to be in possession of the article 10 form which INPS sends out yearly. If this form has not been received you may contact INAS who is able to issue a copy.
You can lodge a request directly to the Australian Tax Office to calculate the deductible amount UPP using the form that can be downloaded from the following link.
Further in depth information:
Treaty Australia-Italy to avoid double taxation – Fiscal residence certificate – CUD (Certificazione Unica Dipendente) – Articolo 10 and esclusion of specific Italian payments – Taxation ruling IT2554
