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  • What are the classes of income?


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    Notional assessable income is divided into four classes:

    • interest
    • offshore banking
    • modified passive
    • other income.

    The classes may include both income and gains of a capital nature. However, capital gains under the capital gains tax provisions are not included in any of the classes. In effect, these capital gains are treated as a separate class of income.


    Most interest income, including payments in the nature of interest, falls into the interest class.

    Excluded are:

    • interest that falls into the offshore banking income class
    • interest that is received in the active conduct of a trade or business - for example, interest on receivables
    • interest derived from money lending - for example, a banking business.
    Offshore banking income

    Offshore banking income is income derived through an offshore banking unit. It is unlikely that a CFC will have this type of income.

    Modified passive income

    Modified passive income is passive income other than amounts that fall within the interest class or the offshore banking income class. As mentioned previously, capital gains under the capital gains tax provisions are not included. Passive income includes rent, royalties, dividends, annuities, capital gains and amounts derived from the assignment of, for example, copyrights.

    Other income

    The 'other income' class comprises amounts that do not fall within the other three classes.

    Last modified: 05 Dec 2006QC 18000