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Learn Tax Terms

Navigate Australian Tax Laws with Confidence

Our comprehensive glossary simplifies the complex world of taxation. Get clear definitions and explanations of key terms to make informed financial decisions.

From understanding ABNs and GST to exploring capital gains and deductions, this glossary is your go-to resource for Australian tax terminology.

ABN (Australian Business Number)

A unique 11-digit identifier issued by the Australian Taxation Office (ATO) to businesses for tax and identification purposes.

ACN (Australian Company Number)

A nine-digit number issued by ASIC to registered companies in Australia for identification.

ATO (Australian Taxation Office)

The government body responsible for administering tax laws and collecting taxes in Australia.

Annual Turnover

The total ordinary income earned by a business during a financial year, used for tax thresholds and concessions.

Assessable Income

The total income a taxpayer earns during a financial year, including salary, wages, dividends, and business income, before deductions.

Input Taxed Supply

A supply where GST is not charged, but related purchases cannot claim GST credits, such as residential rent.

Low-Income Tax Offset (LITO)

A tax offset reducing the tax payable by low-income earners, providing financial relief.

Low-Value Pool

A method of depreciating multiple low-cost assets together for simplified tax reporting.

Luxury Car Tax (LCT)

A tax on cars above a certain value threshold, designed to apply to luxury vehicles.

Marginal Tax Rate

The percentage of tax applied to the last dollar of taxable income.

Medicare Levy

A levy on taxable income that funds the public healthcare system, typically 2% of taxable income.

Negative Gearing

A strategy where the costs of owning an investment property exceed the income it generates, resulting in a tax deduction.

Non-Assessable Income

Income that is not subject to tax, such as some government pensions or exempt foreign income.

Non-Deductible Expense

Costs that cannot be claimed as tax deductions, such as personal living expenses or fines.

Non-Resident Tax

Tax rules that apply to individuals who are not residents of Australia for tax purposes, often with higher rates.

Payee

An individual or entity receiving payments subject to withholding tax, such as wages.

PAYG (Pay As You Go)

A system where businesses and individuals pay tax installments throughout the year to manage their tax liabilities.

PAYG Withholding

A system where employers withhold tax from employee wages and remit it to the ATO.

Payroll Tax

A state-based tax on wages paid by employers when their total wages exceed a specified threshold.

Personal Services Income (PSI)

Income primarily earned through personal skills or efforts, subject to specific tax rules.

Primary Producer

A person or entity involved in agriculture, fishing, or forestry, eligible for specific tax concessions.

Private Health Insurance Rebate

A tax rebate for individuals with private health insurance, reducing tax liability or premiums.

Private Use Adjustment

An adjustment for business expenses partly used for private purposes, such as home office utilities.

Record Keeping

The requirement to maintain accurate financial records for tax purposes, generally for at least five years.

Refundable Tax Offset

An offset where the unused portion is refunded to the taxpayer, such as the R&D Tax Incentive.

Rental Property Expenses

Costs associated with owning a rental property, such as repairs or interest, deductible for tax purposes.

Reportable Fringe Benefits

The grossed-up value of fringe benefits exceeding $2,000, reported on an employee’s PAYG summary.

Resident Tax Rates

The progressive tax rates applying to Australian residents, differing from non-resident rates.

Resident vs Non-Resident Tax

Different tax rules based on residency status, impacting income tax rates and obligations.

Rollover Relief

A deferral of tax obligations when disposing of an asset, typically as part of a restructure or small business relief.

Self-Managed Super Fund (SMSF)

A private superannuation fund managed by its members, who are also trustees.

Simplified Tax System (STS)

A system offering small businesses simplified tax reporting and concessions.

Small Business Entity

A business with an aggregated turnover below a certain threshold, eligible for tax concessions.

Sole Trader

An individual operating a business without a separate legal entity, personally liable for tax obligations.

Superannuation Contribution Cap

The maximum amount individuals can contribute to superannuation each year without incurring additional tax.

Superannuation Guarantee

The mandatory contributions employers must make to their employees' superannuation funds, calculated as a percentage of ordinary earnings.

Tax Avoidance

Legal methods to reduce tax liability, distinct from tax evasion, which is illegal.

Tax File Number (TFN)

A unique number issued by the ATO to individuals and entities for identification and tax purposes.

Tax Invoice

A document issued for a sale, including details required for claiming GST credits.

Tax Offset

A reduction in the amount of tax payable, such as the Low-Income Tax Offset or Private Health Insurance Rebate.

Tax Residency

The status determining whether an individual or entity is considered a resident for Australian tax purposes.

Taxable Income

The income on which tax is calculated, determined by subtracting deductions from assessable income.

Taxable Supply

A sale of goods or services subject to GST, excluding GST-free and input-taxed supplies.

Temporary Budget Repair Levy

A levy applied to high-income earners to aid in reducing the government’s budget deficit.

Thin Capitalisation

Rules limiting the tax-deductibility of interest for businesses with high levels of foreign debt.

Threshold

The income level at which a tax rate, levy, or offset applies or changes.

Trust

An arrangement where a trustee holds property or income for the benefit of others, known as beneficiaries.

Work-Related Car Use

Use of a personal vehicle for work purposes, claimable as a deduction under specific methods.

Work-Related Expenses

Expenses incurred in earning income, such as uniforms, travel, or tools, which may be deductible.