Tax Glossary

Your taxable income with a few important extras added back in. These can include salary sacrifice, reportable fringe benefits and certain investment or rental losses. The government uses ATI to work out your eligibility for things like tax offsets, Family Tax Benefit and child support.

An expense the tax rules let you claim to reduce your taxable income. Not everything you spend is deductible — sadly, calling something “work-related” doesn’t make it so

Extra money your employer pays you on top of your normal wages. It might be for travel, tools, meals or particular working conditions. Many allowances need to be included in your tax return — extra pay doesn’t necessarily mean tax-free pay.

The income the ATO counts before your tax deductions come off. It can include wages, interest, dividends, rent, business income and capital gains, plus other amounts the tax system treats as income.

A closer look by the ATO to check that your tax return is correct. The ATO may review your income, deductions and records to make sure you've reported and claimed everything correctly.

When the ATO takes a closer look at your tax return to check that everything stacks up. They may ask about your income, deductions or records. It doesn’t automatically mean you’ve done something wrong — sometimes they just want to kick the tyres. And sometimes they want to kick your arse.

An 11-digit number that identifies a business or organisation in Australia. You generally need to actually be running, or starting, a business to be entitled to one. An ABN is a business number — not a magic tax deduction card.

Tax residency decides which Australian tax rules and rates apply to you. Australian residents for tax purposes may get the tax-free threshold and different tax rates from foreign residents. And don’t confuse tax residency with immigration residency — they’re two very different beasts. You can be an Australian resident for tax purposes without Immigration sending over the welcome wagon.

The government agency that looks after Australia’s tax and super systems. They collect tax, process tax returns and make sure the rules are followed. Or, put simply: the people who already know how much you earned but still ask you to tell them.

Someone who gets the goodies. In tax and super terms, a beneficiary is a person entitled to receive money or assets from a super fund, trust or deceased estate. The tax treatment depends on what they receive and where it came from — because naturally, the tax system couldn't leave it at "you get the money."

A payment or entitlement you receive — usually because you qualify for it under a particular government program. Benefits can include payments such as pensions and allowances, and some may be taxable. Because apparently even government help sometimes comes with a tax sequel.

Expenses you can claim because they were incurred in running your business and earning business income. Think operating costs, equipment, phone, vehicle expenses and the like — provided there’s a real business connection. The ATO is surprisingly uninterested in financing your lifestyle.

Money your business earns from doing business. This can include sales, fees, commissions and other income from your business activities. In simple terms, if the business earned it, the ATO probably wants to hear about it.

Tax that can apply when you make a profit from selling or disposing of certain assets, such as shares, investments or property. It’s not a separate tax — the capital gain is generally added to your taxable income. Sell something for a tidy profit and, yes, the ATO may want a seat at the table.

When you sell or dispose of an asset for less than its tax cost and make a loss for CGT purposes. You can generally use capital losses to reduce capital gains, but not your wages or other ordinary income. No gain, no glory — but at least the loss may be useful later

Building and construction costs that may be claimed over a number of years instead of all at once. This can include things like extensions, structural improvements and some renovations. The building may be improving, but the deduction likes to take its time.

People who work for themselves rather than as employees. Contractors usually manage their own tax, super and business expenses, and may need an ABN. Just having an ABN doesn’t magically make someone a contractor — the actual working arrangement matters.

Someone who works for themselves and provides services to other people or businesses. Contractors usually manage their own tax and business expenses. Having an ABN helps, but it doesn’t automatically make you a contractor — the real working arrangement matters.

Tax your super fund generally pays on concessional contributions, such as employer super, salary sacrifice and personal contributions you claim as a deduction. The standard rate is usually 15% — although higher-income earners may also get a visit from Division 293, because apparently 15% wasn’t enough excitement.

The amount used to work out your capital gain or loss when you sell an asset. It can include what you paid for the asset plus certain buying, selling and ownership costs. Basically, it’s the tax system’s version of “what did this really cost you?”

A relationship where two people live together as a couple without being legally married. For tax purposes, it can affect things like offsets, Medicare levy calculations and other income-tested rules. Same housemates, very different paperwork.

Money paid after a super fund member dies. It may go to an eligible beneficiary or the deceased person’s estate, usually as a lump sum and sometimes as an income stream. The tax treatment depends on who receives it and how it’s paid — because even death doesn’t completely end the paperwork.

The tax term for the value a depreciating asset loses over time as you use it. If you use the asset to earn income, you may be able to claim that decline in value as a deduction. In other words, the asset gets older, and for once the tax system may actually give you something for it.

An organisation or fund that can receive tax-deductible gifts. If you make an eligible donation of $2 or more to a DGR, you may be able to claim a deduction. And no, donating to your mate’s “very worthy cause” doesn’t automatically count.

Expenses you’re allowed to subtract from your income before your tax is calculated. They can include eligible work, business, investment and other expenses. A deduction reduces your taxable income — it doesn’t mean the ATO hands the whole amount back. If only.

Someone who relies on you financially for support. This can include a spouse, child or other eligible person in some tax situations. The exact rules depend on what tax benefit or calculation is involved — naturally, there’s no one-size-fits-all answer.

Something you own that has a limited useful life and is expected to lose value as you use it. Think computers, tools, machinery and office equipment. If it helps you earn income, you may be able to claim its decline in value — because at least something good can come from watching your gear get older.

A way of claiming the cost of an asset over time as it gets older and loses value. Things like tools, computers and equipment may be claimed this way instead of all at once. The asset wears out slowly, so the tax deduction usually does too.

A payment a company makes to its shareholders from profits it has earned. Dividends may also come with franking credits, which can reduce the tax you pay. Think of it as the company sharing the spoils — with the ATO still keeping an eye on proceedings.

Australia’s system for giving shareholders credit for tax a company has already paid on its profits. That credit usually comes through as a franking credit attached to a dividend. The company paid tax first, so ideally you don’t get taxed twice on the same money.

A way of moving money electronically from one bank account to another. The ATO uses EFT to pay tax refunds directly into your nominated bank account — much quicker than waiting for a cheque to arrive by carrier pigeon.

Someone who works for an employer and is paid wages or salary. Their employer generally withholds tax from their pay and may also have to pay super. In other words, the boss handles part of the tax admin — one of the few perks of not being self-employed.

A scheme where a company gives employees shares, rights or other interests in the business as part of their remuneration. There can be tax consequences when you receive them, when restrictions lift, or when you sell them — because apparently getting a slice of the company also means getting a slice of the tax rules.

Super payments your employer puts into your super fund for you. These usually include compulsory super guarantee payments and may also include extra employer contributions. It’s part of your overall pay package — just money you normally can’t spend yet.

Money you earn from working for an employer. This can include wages, salary, bonuses, commissions and some allowances. If it came through payroll, there’s a good chance the ATO already knows about it.

A lump sum you may receive when your employment ends. It can include things like unused benefits or certain termination payments, and the tax treatment depends on what the payment is for. Leaving the job is simple. The tax treatment of the farewell payment can be less so.

Income you don’t pay tax on. It can include certain government payments, allowances or other amounts that tax law specifically treats as exempt. Tax-free sounds simple — which is usually when the tax rules start adding footnotes.

Money you spend to do your job or run your business. Some of it may be tax deductible, but only if the rules allow it. Buying it is the easy part. Getting the ATO to agree is the fun bit.

The 12-month period the tax system uses to work out your income and tax. In Australia, the financial year runs from 1 July to 30 June. Basically, tax gets its own calendar because the normal one apparently wasn’t complicated enough.

Income you earn from outside Australia. This can include overseas wages, pensions, rent, interest and investments. Depending on your tax residency, you may still need to declare it in Australia — because crossing a border doesn’t always make the ATO lose interest.

Someone who isn’t an Australian resident for tax purposes. Foreign residents can pay different tax rates and usually don’t get the tax-free threshold. Your passport doesn’t decide it — tax residency has its own rules, just to keep things interesting.

A dividend that comes with a franking credit because the company has already paid tax on some or all of the profit. The credit may reduce the tax you pay and, in some cases, increase your refund. One of the rare times a tax credit actually feels like a present.

A tax credit attached to some dividends from Australian companies. It represents tax the company has already paid on its profits and can reduce the tax you owe. In some cases, it can even increase your refund — which is one of the nicer surprises in tax.

Tax employers may have to pay when they give employees certain extras on top of their wages. Things like cars, parking or other benefits can sometimes attract FBT. Free perk for you, possible tax bill for the boss.

Interest the ATO can add when you pay a tax debt late. It builds up over time, so ignoring an ATO debt rarely makes it cheaper. Think of it as the ATO’s way of charging rent on money they reckon you owe.

Money or property you give to an approved charity or organisation. Some donations can be tax deductible, usually if they’re $2 or more and made to a Deductible Gift Recipient (DGR). Generous is good. Generous with a receipt is better.

A 10% tax added to most goods and services sold in Australia. Businesses registered for GST generally collect it from customers and pass it on to the ATO, after claiming eligible GST credits. You collect it, you report it, but sadly you don’t get to keep it.

All the income you receive before tax and deductions are taken out. That can include wages, business income, rent, interest and other earnings. Think of it as the big number before the tax system starts nibbling at it.

Your pay before tax or anything else is taken out. It’s the headline number on your payslip — before tax, super and other deductions start taking their share.

The tax worked out on your taxable income before tax offsets or credits are taken off. Think of it as the starting tax bill — before anything comes along to soften the blow.

A government loan that helps eligible students pay for university or other approved study. You generally start paying it back through the tax system once your income gets high enough. Study now, repay later — the government’s version of “we’ll catch up.”

Money you receive from working, running a business, investments or other sources. Wages, contractor payments, rent and interest can all count. If money is coming in, there’s a fair chance the ATO wants to know about it.

Regular payments you receive over time instead of getting the money all at once. In super, this is usually a pension paid from your super fund. Same money, just arriving in instalments.

Government payments that help people with living costs when they’re eligible. This can include things like JobSeeker, pensions and other allowances. Some payments are taxable and some aren’t — because even government help likes to keep a little mystery.

Tax you pay on the income you earn. How much you pay depends on your taxable income and the tax rates that apply to you. Earn more, pay more — the ATO likes to keep things nice and progressive.

The tax return a person lodges each year to tell the ATO about their income, deductions and other tax information. It’s basically the annual financial catch-up between you and the ATO — whether you were looking forward to it or not.

Money you earn on savings and investments, or money you’re charged when you borrow. Bank interest you receive is usually taxable income. Interest you pay may sometimes be deductible, depending on what the borrowed money was used for. Money making money — and naturally, tax wants to know about it.

Money you earn from investments. This can include bank interest, dividends, rent and other investment earnings, and it generally needs to go in your tax return. Your money made money. Naturally, the ATO would like an introduction.

Money you owe or a financial obligation you’re responsible for. This can include loans, tax debts and other amounts that need to be paid. In short: assets are what you own, liabilities are what keep you awake at night.

Money paid to you all at once instead of in regular payments. It can come from things like super, redundancy or an insurance payout. One big payment, one big moment — and sometimes one big tax question.

A tax rule that can let you sell your home without paying Capital Gains Tax on the profit. It usually applies if the property was your main home, but special rules can apply if you rented it out, moved away, or owned more than one home. Home sweet home — with a possible tax break attached.

The tax rate that applies to the next part of your income. Australia uses different tax rates at different income levels, so earning more doesn’t mean all your income suddenly gets taxed at the higher rate. That myth has had a very long life.

An amount most taxpayers pay to help fund Australia’s public health system. It’s generally worked out as a percentage of your taxable income, although reductions and exemptions can apply. One of those taxes you notice more when it appears on the assessment.

Extra tax some higher-income earners may pay if they don’t have suitable private hospital cover. It’s separate from the normal Medicare Levy. Earn over the threshold without the right cover and the ATO may add a little encouragement.

Costs you pay for using your car for work or business. You may be able to claim things like fuel, servicing, registration and insurance, but only for the work or business part. The family trip to the beach does not become deductible because you answered one work call.

When the costs of owning an investment are more than the income it earns. The resulting loss may be used to reduce other taxable income, depending on the rules. In plain English: the investment is losing money now, with the hope it makes money later.

The final amount you owe the ATO after tax, offsets, credits and other amounts are taken into account. If this number is positive, unfortunately, the ATO is expecting payment.

Money you receive that is not counted as taxable income. Some government payments and other amounts can fall into this category. Not every dollar that lands in your bank account gets invited onto your tax return.

A notice you send to the ATO to say you don’t need to lodge a tax return for that year. It closes the loop so the ATO isn’t sitting there wondering where your return is.

The ATO’s official summary after your tax return is processed. It shows whether you’re getting a refund, have tax to pay, or whether something has been adjusted. Basically, the ATO’s version of the final scorecard.

Work expenses that are common for people in a particular job. What you can claim depends on what you actually do and what you paid for yourself. Being a tradie, nurse or teacher does not give you an automatic shopping list of deductions.

Australia’s system for collecting tax during the year instead of waiting until tax time. Employers usually withhold tax from wages, and some taxpayers make instalments on business or investment income. Less of a surprise at year-end — at least in theory.

The person or business receiving the money. If you’re getting paid, you’re the payee. Simple one.

The person or business making the payment. If you’re handing over the money, you’re the payer. Also simple — enjoy it while it lasts.

Regular tax payments you may make during the year on business or investment income. The ATO works them out using your past tax information, and the payments are credited against your final tax bill. Think of it as paying the tax bill in smaller bites.

Tax taken from certain payments and sent to the ATO before the money reaches you. It commonly applies to wages, some contractor payments and other payments covered by the rules. The ATO gets its share first, then you get what is left.

A payment slip or notice that tells you how to pay the ATO and helps them match the payment to your account. Use the right payment details — sending money is only useful if the ATO knows it came from you.

A record of what you were paid and how much tax was withheld. These days most of this information is reported electronically through Single Touch Payroll, so the old paper payment summary is becoming a bit of a museum piece.

Extra amounts the ATO can charge when tax or super rules aren’t followed. They can apply for things like late lodgement, false statements or other breaches. The ATO does have a sense of humour — it just rarely shows up on penalty notices.

Money you put into your super fund yourself, usually from income you’ve already paid tax on. Depending on the rules, you may be able to claim some personal contributions as a tax deduction.

Personal super contributions you choose to claim as a tax deduction. You need to meet the rules and usually lodge a valid notice with your super fund first. Put money into super, claim the deduction, then make sure the paperwork actually agrees with you.

The law that sets rules for how personal information is collected, used, stored and shared. For tax services, that includes sensitive details like your TFN and financial information. In short: your private stuff is supposed to stay private.

Money the government may give you to help with the cost of private health insurance. You can usually get it as a lower premium or claim it through your tax return. The amount depends on things like your age and income.

Documents or checks used to prove you are who you say you are. This might include a passport, driver licence or other approved ID. Tax refunds and identity thieves are both interested in your details — so this bit matters.

Keeping the documents and information that back up what you put in your tax return. That can include receipts, invoices, bank records and logbooks. Claim it first, prove it later — if the ATO comes knocking.

The evidence that supports your income, deductions and other tax information. You generally need to keep tax records for the required period. “I’m pretty sure I bought it” is unfortunately not a record.

Money you may receive when your job ends because your position is no longer needed. A genuine redundancy payment can have special tax treatment, and part of it may be tax-free. Losing the job is bad enough — at least the tax rules occasionally show some mercy.

Money your employer pays you back for something you paid for on their behalf. A genuine reimbursement is different from an allowance and usually means you can’t also claim the same expense as a deduction. Getting paid back twice would be nice, but the ATO has thought of that.

Costs you pay for owning and renting out a property. Things like interest, property management fees, repairs and insurance may be deductible if they meet the rules. Owning the property is one thing. Getting every expense past the ATO is another.

Money you receive from renting out a property. This can include rent and some other payments from tenants. If the property is making you money, the ATO will want to hear about it.

Extra super your employer pays for you that must be shown on your income statement. This can include salary sacrifice or extra employer super above the normal compulsory amount. It may affect some tax and government benefit calculations.

The value of certain work benefits your employer gives you, such as a car or other perks. You may not pay tax directly on this amount, but it can still affect things like Medicare, HELP repayments and some government benefits.

You’re responsible for making sure the information in your tax return is correct. Even if someone else prepares it for you, the return is still yours. You can outsource the paperwork — not the responsibility.

When you choose to have part of your pay sent somewhere else before it reaches you. A common example is putting extra money into super. It can have tax benefits, but the rules still apply — because of course they do.

Costs you pay for study that helps you in your current job. You may be able to claim things like course fees, books and travel if the study is closely linked to the work you already do. Studying for a completely different career usually does not count.

Someone who owns shares in a company. Shareholders may receive dividends and can benefit if the value of the company rises. Own enough shares and you’re an investor. Own one share and technically, you’re still invited to the tax conversation.

Small pieces of ownership in a company. If you own shares, you may receive dividends and you may make a capital gain or loss when you sell them. Tiny slice of the company, full-sized tax consequences.

Someone who owns and runs a business in their own name. The business and the person are basically the same for tax purposes, so the income goes into the owner’s tax return. Simple setup, very personal consequences.

Your husband, wife or de facto partner for tax purposes. Your spouse’s income can affect things like tax offsets, Medicare and other income-tested calculations. Romance may be private. Tax apparently disagrees.

A record of what’s happened in your ATO account. It shows things like tax debts, payments, credits and the current balance. Basically, the running scoreboard between you and the ATO.

Extra money the government may put into your super if you are eligible and make your own after-tax super contribution. It is designed to help lower and middle-income earners build their super. Free money from the government is rare enough to deserve its own glossary entry.

Money put aside to help pay for your retirement. Your employer usually pays super for you, and you can also add extra money yourself. It is your money — you just normally cannot use it until later.

The minimum super your employer usually has to pay for you. It is worked out as a percentage of your ordinary earnings and paid into your super fund. Think of it as part of your pay that future-you gets instead.

A person or business registered to provide tax services for a fee. A registered tax agent can prepare, advise on and lodge tax returns for clients. In other words, someone who voluntarily spends their day dealing with tax so you don’t have to.

Using arrangements designed to get around the tax rules without necessarily breaking them outright. The ATO can still challenge these arrangements if they’re artificial or mainly set up to avoid tax. Clever tax planning is one thing. Getting too clever is where the fun usually starts.

An amount you can claim to reduce your taxable income. It does not mean you get the whole amount back. Spend $100 on something deductible and the ATO is not sending you a $100 thank-you cheque.

Deliberately breaking the tax rules to pay less tax than you should. This can include hiding income, making up deductions or giving false information to the ATO. Tax planning is legal. Tax evasion is where the handcuffs can enter the conversation.

Your personal number used by the ATO to identify you for tax and super purposes. You usually keep the same TFN for life, so treat it like a password you really don’t want floating around the internet.

A form you complete when you start a new job so your employer knows how much tax to take from your pay. It covers things like your TFN, tax residency and whether you’re claiming the tax-free threshold. Small form. Surprisingly important consequences.

An amount that reduces the tax you have to pay. Unlike a deduction, which reduces your taxable income, an offset comes directly off the tax bill. Same tax system, much nicer end of the calculator.

The amount of tax you owe after the numbers are worked out. It takes into account your taxable income, tax rates and any offsets or credits. This is the bit where the calculator stops being theoretical.

Money the ATO pays back to you when you have paid more tax than you needed to. It can happen because too much tax was withheld or because deductions and tax offsets reduced your final tax bill. A refund is your money coming back — not a bonus from the ATO.

The rules that decide whether Australia treats you as a resident for tax purposes. It can affect your tax rates, tax-free threshold and whether overseas income must be declared. It is not the same as your visa or immigration status — because one kind of residency was clearly not enough.

The form you lodge with the ATO showing your income, deductions and other tax information for the year. The ATO uses it to work out whether you get a refund or have tax to pay. Annual paperwork with a potentially interesting ending.

Tax taken out of money paid to you and sent to the ATO on your behalf. It commonly comes out of wages and some other payments. Think of it as tax already paid during the year, not money automatically waiting to come back as a refund.

The amount an Australian resident for tax purposes can generally earn before income tax starts applying. You normally claim it from only one employer at a time. Two employers claiming it can make payday look better — right up until tax time.

Your income after allowable deductions are taken off. This is the number the tax rates are generally applied to. Gross income gets the attention. Taxable income gets the bill.

A payment that counts as income for tax purposes. This can include wages, contractor payments, business income and other money the tax rules say must be declared. If it is taxable, the ATO wants it on the scoreboard.

A report some businesses must send to the ATO showing payments they made to contractors. The ATO can then match those payments against the contractor’s tax return. In other words, if someone paid you, there is a fair chance the ATO already knows.

A person or business that has tax obligations in Australia. That might mean lodging a tax return, paying tax, or both. If the ATO knows your name, chances are you’re in the club.

Costs you pay when you travel for work. This can include fares, flights, accommodation and some other travel costs, but only the work part can be claimed. Your holiday does not become deductible because you checked one email.

An agreement between a business and a contractor to have tax taken out of the contractor’s payments. The business sends that tax to the ATO, which can help the contractor avoid a nasty tax bill later.

Tax taken out of certain payments before the person receiving the money gets it. It can apply to wages, payments to some contractors, payments where no ABN is provided, and certain interest, dividends or royalties — particularly payments to foreign residents. The person making the payment generally sends the tax withheld to the ATO. In simple terms: the tax gets taken out before the money reaches your hands. The ATO likes to get in early.

Costs you may be able to claim when you work from home. This can include things like electricity, phone, internet and office equipment, depending on how you work and the records you keep. Working from the couch still counts as working — sadly, the couch itself probably doesn’t.

Things you pay for because of your job. You may be able to claim them if you paid for them yourself, were not paid back, and the expense is really connected to your work. Buying it for work is the important bit — not just owning it.

Someone in Australia on a working holiday visa, usually subclass 417 or 462, who works while they travel. Working holiday makers can have different tax rules and rates from other taxpayers. Come for the beaches, stay for the tax residency questions.

A tax offset that may be available to people who live in certain remote areas of Australia. You need to meet the rules, including where and how long you lived there. Visiting the outback for a weekend does not make you a local.