There are three types of tainted income:
- passive income
- tainted sales income
- tainted services income.
Under section 446 of the ITAA 1936, passive income includes certain types of dividend, interest, royalty, annuity and rental income. It also includes gains on the disposal of assets that produce passive income or which are not used solely in carrying on a business.
Tainted sales income
Under section 447 of the ITAA 1936, tainted sales income is income from a controlled foreign company which is gained from the sale of goods purchased from or sold to:
- an associate who is an Australian resident
- an associate who is not an Australian resident but who carries on business in Australia through a permanent establishment.
Tainted services income
Under section 448 of the ITAA 1936, tainted services income is income derived from the provision of services by a controlled foreign company to:
- an Australian resident (except in connection with a foreign permanent establishment of the Australian resident)
- a non-resident in connection with the non-resident's Australian permanent establishment.
Tainted services income also includes income derived from services provided indirectly to Australian residents, subject to certain requirements. Services include any benefit, right or privilege provided under an arrangement for the performance of work or the provision of facilities - for example, performance of technical, managerial or transport work.