Tax & Accounting Glossary

Plain-English definitions of the most common tax, accounting, and superannuation terms used in Australia.

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ABN (Australian Business Number): A unique 11-digit identifier issued by the Australian Business Register to businesses operating in Australia. Required for tax and business dealings with the ATO and other government agencies.
ATO (Australian Taxation Office): The principal revenue collection agency of the Australian Government, responsible for administering tax laws, superannuation, and other related programs.

BAS (Business Activity Statement): A form submitted to the ATO by registered businesses to report and pay their tax obligations, including GST, PAYG withholding, PAYG instalments, and other taxes.

Capital Gains Tax (CGT): A tax on the profit (capital gain) made when you sell or dispose of an asset that was acquired after 20 September 1985. CGT is not a separate tax — it forms part of your income tax.
CPA (Certified Practising Accountant): A professional designation awarded by CPA Australia to accountants who meet education, experience, and examination requirements. CPAs adhere to strict ethical and professional standards.

Depreciation: The decline in value of an asset over its effective life. Businesses and investors can claim depreciation as a tax deduction to account for wear and tear on assets such as equipment, vehicles, and buildings.

Franking Credits: Also known as imputation credits, these represent tax already paid by a company on its profits. When dividends are distributed to shareholders, franking credits can reduce the shareholder's personal tax liability.
FBT (Fringe Benefits Tax): A tax paid by employers on certain benefits provided to employees or their associates, such as company cars, health insurance, or entertainment. FBT is separate from income tax.

GST (Goods and Services Tax): A broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. Businesses with a turnover of $75,000 or more must register for GST.

Income Tax: A tax levied by the Australian Government on the taxable income of individuals, companies, and other entities. Tax rates vary depending on the type of taxpayer and the amount of income earned.

LRBA (Limited Recourse Borrowing Arrangement): A special type of borrowing arrangement that allows an SMSF to borrow money to purchase a single acquirable asset held in a separate trust. The lender's recourse is limited to the asset purchased.

Negative Gearing: An investment strategy where the costs of owning an asset (such as a rental property) exceed the income it generates. The resulting loss can be offset against other taxable income to reduce your overall tax liability.

PAYG (Pay As You Go): A system for paying income tax in instalments throughout the year rather than as a lump sum. PAYG withholding applies to employers withholding tax from employee wages; PAYG instalments apply to business and investment income.

Salary Sacrifice: An arrangement where an employee agrees to forgo part of their pre-tax salary in exchange for benefits such as additional superannuation contributions, a car, or other approved items. This can reduce taxable income.
SMSF (Self-Managed Super Fund): A private superannuation fund with up to six members that you manage yourself. SMSFs provide greater investment control but come with strict compliance obligations regulated by the ATO.
STP (Single Touch Payroll): An ATO reporting system that requires employers to report payroll information — including salaries, wages, PAYG withholding, and superannuation — directly to the ATO each time they run their payroll.
Superannuation (Super): Australia's compulsory retirement savings system. Employers must contribute a percentage of an employee's ordinary time earnings (currently 11.5%) into a complying superannuation fund.

Tax Deduction: An expense that can be subtracted from your assessable income to reduce the amount of tax you owe. Common deductions include work-related expenses, investment costs, and charitable donations.
Tax File Number (TFN): A unique number issued by the ATO to individuals, companies, and other entities for tax and superannuation purposes. Providing your TFN to employers and financial institutions ensures correct tax treatment.
Tax Offset (Rebate): A reduction applied directly to the amount of tax you owe, as opposed to a deduction which reduces your taxable income. Common offsets include the low-income tax offset and the senior Australians tax offset.
Trust: A legal arrangement where a trustee holds and manages assets on behalf of beneficiaries. Common types in Australia include family (discretionary) trusts, unit trusts, and testamentary trusts, each with different tax implications.

Work-Related Expenses: Costs incurred in earning your income that may be claimed as tax deductions. Examples include travel between work locations, uniforms, tools, self-education, and home office expenses.