What are the classes of foreign income?



This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

End of attention

Foreign income is divided into four classes for the purpose of allowing a foreign tax credit:

  • passive income
  • offshore banking income
  • certain lump sum payments from foreign non-complying superannuation funds
  • other income.

What is passive income?

Passive income includes dividends, interest, annuities, rental income, royalties, amounts received for the assignment of a patent, copyright, capital gains, passive commodity gains and amounts included in assessable income under the CFC, FIF or transferor trust measures.

Capital gains

An assessable gain or profit of a capital nature is deemed to be foreign income for working out a foreign tax credit if it is derived from a source in a foreign country. Capital gains are included in the 'passive' class of foreign income.

For further details on credits for foreign tax paid on capital gains, please refer to Taxation Ruling IT 2562.

What is offshore banking income?

Offshore banking income includes:

  • interest, fees, commissions or similar income derived from offshore banking transfers
  • dividends paid by a company out of profits derived from offshore banking transfers.

What are lump sum payments from foreign non-complying superannuation funds?

These lump sum payments included in assessable income under section 27CAA are treated as a separate class of income.

What is other income?

Other income is income that does not belong to any of the other classes of income. For instance, it would include income from commercial activities, salary or wages and most pensions.

Last modified: 05 Dec 2006QC 17522