Taxable income plus certain other income (salary packaging amounts and salary sacrifice amounts) and losses (rental and investment losses) declared by you and your partner that affect tax offsets and other government benefits such as family tax benefits and child support.
Assessable Income
Your gross income which may include salary and wages, dividends, interest and rent before and deductions are allowed. This also includes net capital gains, ETP and other amounts that aren’t normally classed as income.
Asset
Any form of property owned. E.g. A car, house, work equipment.
Audit
A study of your financial affairs to ensure that your tax returns are correct and that you’re paying the right amount of tax.
Australian Resident
Different tax rates are applied depending on whether you are an Australian Resident or not. The tax rate is higher for a non-resident’s taxable income and they aren’t entitled to the tax-free threshold.
B
Beneficiary
A person who is entitled to a benefit, if this is within a superfund it may be the member of the fund and/or financial children.
Benefit
An amount paid as part of a super income stream, lump sum or a mixture of the two. It may also be an entitlement from your fund that you, your estate and your children are entitled.
Business Deductions
Expenses that are approved under the tax law that can be deducted from your income
C
Capital Gains Tax
Tax on the profit received from selling an asset (most houses that you live in and cars are exempt from this)
Contract Workers
Contractors or contract workers usually pay their own tax by paying PAYG instalments.
Contributions Tax
Tax paid by your superannuation fund on the assessable income of the super fund.Assessable income includes contributions such as:- super guarantee and employer contributions- salary sacrifice- investment earnings- personal contributions that you have notified your superfund you’ll be claiming a deduction on. The current rate of tax on the assessable income of a complying super fund is 15%.
D
De facto Relationship
A relationship between two people (the same or opposite sex) who are not legally married but live together as a couple.
Death Benefit
An employee or superfund member who has passed away may have payments made to a beneficiary as a lump sum or income stream.
Decline in Value
Also known as depreciation. An amount that can be deducted from the value of a depreciating asset that you have had within the financial year. This is based on the effective life of the asset.
Deductible Gift Recipient (DGR)
Donations to a charity that is a DGR are tax deductible. If the charity is not a DGR then donations made to it cannot be claimed.
Deductions
Money that is spent to allow you to earn your income is deducted from your assessable income to calculate your taxable income.
Depreciating Asset
An asset that has a limited effective life and is expected to decline in value over the time it is used.
Dividend
A payment from a company to a shareholder from a company’s profits.
E
Electronic Funds Transfer (EFT)
Electronic payments made by the ATO to a valid bank account.
Employee
A person who receives a salary or wages.
Employee Share Scheme
A company provides its employees with interests in the company (shares, staples securities, rights to shares or rights to staples securities), under an employee share scheme (ESS).
Employment Termination Payment (ETP)
A lump sum paid to an employee if their employment is terminated.
Exempt Income
Income that isn’t taxable i.e. tax free
Expense
Money that is spent on items you need for work
F
Financial Year
The period from 1 July to 30 June
Franking Credit
Income tax credits from a company that are passed on to its shareholders through a dividend.
Fringe Benefit Tax
Tax that’s paid on a non-salary benefit provided to an employee (e.g. car)
G
General Interest Charges (GIC)
The way the ATO manages calculations and imposing penalties, including penalties for late payments and all outstanding ATO related debts. The interest rate compounds daily and varies every quarter with changes in the financial market.
Gifts/Donations
A donation to a recognised charity (see DGR)
Gross Income
Total income before any business or tax deductions are accounted for.
Gross Salary
The money received before tax is deducted
Gross Tax
Tax on taxable income before tax offsets are taken into account.
H
Higher Education Loan Program (HELP)
Formerly known as the Higher Education Contribution Scheme (HECS). HELP is a Government scheme that assists eligible students with their student contributions and tuition fees.
I
Income
Money earned from personal effort (wages, contractors) and investments
Income Stream
Regular payments paid over a period of time. Usually a pension from your super fund.
Income Support
Benefits, allowances and pensions paid by the Australian Government such as Newstart
Income Tax
The amount of money paid to the Government
Interest
Money that is earned from investments, or may be accumulated or owed from a loan.
L
Liability
A debt or financial obligation incurred
Lump Sum
Money taken as a single payment.
M
Marginal Tax Rate
The tax rate applicable to the income range that a person’s taxable income is in.
Medicare Levy
An amount that is paid by most taxpayers to help cover part of the cost of the public health system.
Medicare Levy Surcharge
If a taxpayer doesn’t have the proper level of private patient hospital cover and their income exceeds a relevant threshold, they will incur a Medicare Levy Surcharge liability.
N
Negative Gearing
Money borrowed for an investment, where the interest and deductions exceed the investment income and can be claimed as a deduction against other types of income.
Net Amount Payable
The total amount you need to pay the ATO which includes tax and Medicare Levy.
Non-Lodgement Advice (NLA)
A form you need to send to the ATO to advise that you don’t need to lodge a tax return.
Notice of Assessment (NOA)
A notice you receive from the ATO advising you whether you have tax to pay or will be receiving a refund. This is sent electronically through MyGov if you have a MyGov account or it will be posted out to the address the ATO have on file.
P
Pay as You Go (PAYG)
A system used to report and withhold amounts of tax on business and investment income.
Payee
A person who receives a payment
Payer
A person who makes a payment
Payment Advice
Payment advice commonly known as Payment slips are provided to provide taxpayers with multiple payment options. The ATO use details on the payment slip to identify a taxpayer and credit any payments to their account.
Payment Summary
A document given to an employee at the end of a financial year stating how much they have earned and how much tax was withheld.
Penalties
Penalties can be executed by the ATO for Taxation and Superannuation offences.
Personal Contributions
Superannuation contributions made to a taxpayer’s super fund from their after-tax income.
Personal Deductible Super Contributions
Personal super contributions a taxpayer can claim as a tax deduction on their tax return if they meet certain eligibility criteria.
Privacy Act
An Act of Parliament which protects tax file numbers among other personal details and information against misuse.
Proof of Identity
Documentation like a birth certificate or passport which proves who you are.
R
Recordkeeping
Taxpayers are required to keep all records to support claims made on their tax return. This may include receipts, bank statements and invoices.
Records
Records must be kept in English and kept for five years from the date they were prepared, obtained or transactions completed.
Reimbursements
These are generally amounts received from an employer to cover the cost of work-related expenses.
Rental Expenses
You can claim a deduction for some expenses relating to your rental property while it is rented or available for rent.
Rental Income
Rental and other related income (e.g. Bond payments for damages) are the amounts received when you rent out your property. The full amount of rent received must be reported on your tax return.
Responsibilities of each Taxpayer
Even if someone else helps you prepare your tax return, you are still legally responsible for the accuracy of the information.
S
Shareholder
Someone who owns shares
Shares
A right of ownership in a company
Sole Trader
Someone who solely owns and operates their own business
Spouse
This includes another person (of any sex) who: - you were in a relationship with by law (e.g. marriage, commitment) - although not married, you are in a relationship and live with
Statement of Account
Provides a list of payments and transactions within your tax account during a certain time period, it also shows the current balance on your account.
T
Tax Agent
A person or business registered with the Taxation Practitioners Board and provides tax agent services for a fee.
Tax Avoidance
Tax avoidance involves deliberate misuse of the tax system
Tax Evasion
Tax evasion involves under claiming on income or an overclaiming deductions.
Tax File Number (TFN)
A unique identifier number to assist with administering tax and other Australian Government systems. E.g. Centrelink payments.
Tax File Number Declaration
A form that helps employers determine how much tax to withhold from their employees’ payments.
Tax Offset
An entitlement that decreases the amount of tax to be paid.
Tax Payable
An amount of tax that is required to be paid.
Tax Return
A form with a person’s income tax details that needs to be completed and lodged with the ATO each financial year.
Tax-free Threshold
If an employee is an Australian resident for taxation purposes, they can claim the $18,200 tax-free threshold. If they are employed by two employers, they can only claim the tax-free threshold with one employer at a time. Foreign residents are unable to claim the tax-free threshold.
Taxable Income
Gross income less allowable deductions
Taxpayer
A person who earns an income, profits or gains of a capital nature.
W
Withholding Tax
If a receiver hasn’t provided their TFN, withholding tax is deducted from the source:- interest, dividend and royalty payments made to non-residents- certain investments or payments made to residents.
Working Holiday Maker
A person who comes to Australia on a subclass 417 Visa (working holiday) or a subclass 462 Visa (work and holiday). They have different rates of tax.
