Glossary
Tax and accounting terms, in plain English
The words you will hear from us and the ATO, explained simply, with a link to the official source.
A
- Assessable income
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Assessable income is the income you pay tax on once it exceeds your tax-free threshold, such as wages, tips, bonuses, interest, dividends, rent and some allowances, including the market value of goods or services received instead of money. Assessable income minus allowable deductions equals taxable income. Exempt income and non-assessable non-exempt income are treated differently.
- Australian business number (ABN)
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An ABN is a unique 11-digit number that identifies a business or other enterprise to government and the community, issued through the Australian Business Register. Not everyone is entitled to one, and the registrar can review at any time whether the business or enterprise has actually started. When an application succeeds, the number is generally issued straight away.
- Australian company number (ACN)
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An ACN is the number ASIC gives a company when it is registered (for example, Ross Accounting Pty Ltd is ACN 153 889 975). If a company is registered without choosing a name, its ACN becomes its name, such as "ACN 123 456 789 Pty Ltd", and the name and ACN must appear on certain company documents.
B
- Base rate entity
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A base rate entity is a company with aggregated turnover under $50 million for the income year and no more than 80% of its assessable income from passive sources such as interest, rent, dividends and net capital gains. Base rate entities pay the lower 25% company tax rate, which applies from 2021–22 onwards (including 2026–27); other companies pay 30%.
- Business activity statement (BAS)
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A BAS is the form businesses use to report and pay GST, PAYG withholding, PAYG instalments and, where relevant, FBT instalments and other amounts such as fuel tax credits. The due date for lodging and paying is shown on each statement.
C
- Capital gains tax (CGT)
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Capital gains tax is the part of income tax that applies to profits when you dispose of assets such as property, shares or crypto assets; it is not a separate tax. A capital gain is added to your taxable income in the year of the CGT event, while a capital loss can be offset against capital gains in the same year or carried forward to later years.
- CGT discount
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The CGT discount lets Australian resident individuals and trusts reduce a capital gain by 50% (complying super funds by 33.33%) when the asset was owned for at least 12 months before the CGT event; companies cannot use it. The discount still applies for 2026–27, but under reforms announced in the 2026–27 Budget that the ATO reports are now law, from 1 July 2027 the 50% discount for individuals, trusts and partnerships will be replaced with cost base indexation and a 30% minimum tax rate, applying only to gains that accrue after that date.
- Company
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A company is a business structure that is a separate legal entity: it is run by directors, owned by shareholders, and its members generally have limited liability for its debts. A company lodges its own tax return, must complete an ASIC annual review, and every director needs a director ID.
- Concessional contributions
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Concessional contributions are before-tax super contributions, including employer contributions, salary sacrifice and personal contributions you claim as a tax deduction. The general concessional contributions cap is $32,500 for 2026–27 (it was $30,000 for 2024–25 and 2025–26), counted across all your funds; people with a total super balance under $500,000 on 30 June of the previous financial year may be able to carry forward unused cap amounts from up to 5 previous years.
- Cost base
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The cost base of a CGT asset is generally what you paid for it plus the other costs of acquiring, holding and disposing of it, such as stamp duty, legal and agent fees, and capital improvements. It is made up of 5 elements, and any costs you can claim as a tax deduction are left out.
D
- Deduction
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A deduction is an expense you can subtract from your assessable income to arrive at your taxable income, so it lowers the tax payable indirectly by reducing the income that tax is worked out on. For a work-related deduction you generally must have paid for it yourself without reimbursement, it must directly relate to earning your income, and you need a record to prove it. A $1,000 standard deduction for work-related expenses applies from the 2026–27 income year.
- Depreciation (Decline in value)
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Depreciation (the tax law calls it decline in value) spreads the deduction for a depreciating asset over its effective life, using either the prime cost or the diminishing value method, and only for the time the asset is used for a taxable purpose. Some assets used mainly to earn non-business income and costing $300 or less can be deducted immediately, and eligible small businesses can use simplified rules instead.
- Director identification number (Director ID)
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A director ID is a unique 15-digit identifier that every director of an Australian company must have before being appointed, issued by Australian Business Registry Services. You keep it for life and need only one, however many companies you direct. ASIC advises that from 1 July 2027 companies will have to provide their directors' IDs to ASIC.
- Discretionary trust
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A discretionary trust is a trust where the trustee chooses, within the terms of the trust deed, which beneficiaries receive income or capital and how much. Beneficiaries are generally taxed on their share of the trust's net income for the year, whether or not it is actually paid to them. Many are called family trusts, but a trust is only a family trust for tax purposes once the trustee makes a family trust election.
- Division 7A (Div 7A)
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Division 7A is a set of rules that can treat loans, payments or debt forgiveness from a private company to a shareholder or their associate as an unfranked dividend, unless the amount is repaid or put under a complying loan agreement by the company's lodgment day. Complying loans must charge at least the benchmark interest rate, which is 8.77% for the 2026–27 income year (8.37% for 2025–26) for companies whose income year ends on 30 June.
F
- Financial year (Income year)
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The Australian financial year, also called the income year for tax, ends on 30 June, so the 2026–27 financial year runs from 1 July 2026 to 30 June 2027. Some entities that meet certain requirements use an income year ending on another date, called a substituted accounting period, and the standard 30 June due dates do not apply to them.
- Franking credits (Imputation credits)
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Franking credits represent company tax already paid on profits distributed as dividends. Australian resident shareholders include the dividend plus the franking credit in assessable income and receive a tax offset equal to the credit, and excess credits may be refunded to some shareholders whose marginal tax rate is below the company rate. Companies cannot get a refund of excess franking credits.
- Fringe benefits tax (FBT)
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Fringe benefits tax is a tax employers pay on certain benefits given to employees or their associates in a form other than salary or wages, and it is separate from income tax. The FBT year runs from 1 April to 31 March, and the rate is 47% for the FBT year ending 31 March 2027 (the same rate has applied since the year ending 31 March 2023). For that year, where certain benefits for an employee have a total taxable value over $2,000, the grossed-up value must also be reported on the employee's income statement or payment summary.
G
- General interest charge (GIC)
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The general interest charge is interest the ATO can apply, using a daily rate, to tax debts not paid by the due date, including shortfalls from amendments and underestimated instalments. The rate is reset each quarter: it is 11.51% a year for October to December 2026 (11.43% for July to September 2026).
- Goods and services tax (GST)
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GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. A business must register for GST once its GST turnover reaches $75,000 or more ($150,000 for non-profit organisations), and taxi and ride-sourcing drivers must register whatever their turnover.
- GST credits (Input tax credits)
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GST credits let a GST-registered business claim back the GST included in the price of things it buys for business use, through its BAS. You generally need a tax invoice for purchases over $82.50 (including GST), can only claim the business share of mixed-use purchases, and must claim within a 4-year time limit.
H
- HELP debt (Study loan)
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A HELP debt is a Higher Education Loan Program loan, repaid through the tax system once your repayment income passes a threshold. For 2026–27, compulsory repayments start above $69,528, at 15 cents for each dollar over that amount, with higher marginal rates above $129,717 and a flat 10% of total repayment income from $186,051. Repayment income includes taxable income plus items such as reportable fringe benefits and reportable super contributions.
I
- Income statement
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An income statement is the end-of-year record of the payment information an employer has reported and finalised for an employee through Single Touch Payroll; it is the equivalent of a payment summary and is viewed in ATO online services through myGov. Employers generally finalise it by 14 July, after which it shows as "tax ready" and can be used to lodge the tax return.
- Instant asset write-off (IAWO)
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The instant asset write-off lets small businesses with aggregated turnover under $10 million deduct the full cost of each eligible asset costing less than $20,000 in the year it is first used or installed ready for use. The ATO reports that the $20,000 limit is now law on a permanent basis from 1 July 2026, so it applies for 2026–27; assets costing $20,000 or more can still be placed in the small business simplified depreciation pool.
L
- Lodgment program (Tax agent lodgment program)
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The ATO's schedule of later due dates for returns lodged by registered tax agents. For 2025–26 tax returns, most individuals and trusts not required to lodge earlier have until 15 May 2027, but returns are due 31 October 2026 if an earlier year's return was still outstanding at 30 June 2026, and 31 March 2027 if the latest return showed a tax liability of $20,000 or more. The ATO advises that people using an agent for the first time, or changing agents, contact the agent before 31 October to be included in the program.
- Low income tax offset (LITO)
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A non-refundable tax offset for Australian residents with taxable income up to $66,667. The ATO currently lists a maximum of $700 at $37,500 or less, reducing by 5 cents per dollar between $37,501 and $45,000, then from $325 by 1.5 cents per dollar between $45,001 and $66,667; the page does not tie these figures to a particular income year. It is worked out automatically when the tax return is lodged.
M
- Main residence exemption
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The capital gains tax exemption for an Australian resident's home. A full exemption generally applies when the dwelling was the home of the owner and their family for the whole ownership period, was not used to earn income (for example rented out or run as a business) and sits on land of 2 hectares or less; otherwise only a partial exemption may be available.
- Medicare levy
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A levy on top of income tax that helps fund Medicare. The ATO's current guidance (checked October 2026, during the 2026–27 year) puts it at 2% of taxable income, and the ATO's 2026–27 resident tax rate table also refers to a 2% levy. Some people may get a reduction or exemption depending on their own and their spouse's income and circumstances. For employees it is usually covered by the tax withheld from pay.
- Medicare levy surcharge (MLS)
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An extra charge of 1% to 1.5% for people without an appropriate level of private patient hospital cover whose income for MLS purposes is above a threshold. For 2026–27 the surcharge starts above $105,000 for singles and $210,000 for families (plus $1,500 for each dependent child after the first), reaching 1.5% above $164,000 for singles and $328,000 for families. It is separate from, and paid in addition to, the Medicare levy.
- myGov
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The Australian Government's online account that lets people link to and use a range of government services, including ATO online services, from one sign-in. The ATO recommends signing in with myID, and the secret question sign-in option cannot be used to link to or access ATO online services.
N
- Negative gearing
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A rental property is negatively geared when its deductible expenses, such as interest, exceed the rent it earns; the loss can generally be deducted against other income like wages, or carried forward if that income is not enough. Under reforms the ATO describes as now law, from 1 July 2027 negative gearing for residential property is limited to new builds, while properties held at 7:30pm AEST on 12 May 2026 are exempt from the change.
- Non-concessional contributions (NCCs)
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Personal super contributions made from after-tax money that are not claimed (or not allowed) as a tax deduction. The cap is $130,000 for 2026–27 (up from $120,000 in 2025–26), and it drops to nil for anyone whose total super balance at the previous 30 June was at or above the general transfer balance cap. People under 75 may be able to bring forward up to 3 years of caps.
- Notice of assessment (NOA)
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The statement the ATO issues after processing a tax return, showing the tax on taxable income, credits for tax already paid, and the refund or amount owing with its due date. It arrives in the myGov Inbox when the ATO is linked, and the ATO can generally still review the assessment for 2 years (4 years in some cases).
P
- Partnership
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A business structure in which 2 or more people jointly manage a business and split its profits or losses between them. A partnership needs its own ABN and TFN, lodges a partnership tax return each year, and each partner pays tax on their share; in a general partnership every partner has unlimited liability for the partnership's debts.
- Payday Super
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The rules in effect from 1 July 2026 requiring employers to pay super guarantee for each payday instead of quarterly. Contributions of 12% of qualifying earnings must generally reach the employee's fund within 7 business days after payday, with up to 20 business days in some cases such as a new employee's first contribution.
- PAYG instalments (Pay as you go instalments)
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Regular prepayments of income tax on business and investment income, usually made quarterly and credited against the tax assessed when the return is lodged. Under the ATO's current entry thresholds (checked October 2026), individuals (including sole traders) and trusts are entered automatically when their latest return shows instalment income of $4,000 or more, their latest notice of assessment shows tax payable of $1,000 or more and their notional tax is $500 or more; voluntary entry is also possible.
- PAYG withholding (Pay as you go withholding)
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Tax a business withholds from certain payments and sends to the ATO, most commonly from wages paid to employees and directors, and from payments to businesses that do not quote an ABN. Independent contractors are generally not withheld from unless there is a voluntary agreement, and drawings taken by sole traders or partners are not wages.
- Payment plan
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An arrangement with the ATO to pay an overdue tax debt by weekly, fortnightly or monthly instalments over the shortest period possible. Debts of $200,000 or less can often be set up online, through the self-help phone line or by a registered agent; the general interest charge keeps compounding daily while the plan runs, and income tax and activity statement debts need separate plans.
- Private health insurance rebate
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A government contribution towards private health insurance premiums, taken as a premium reduction or as a refundable tax offset. It is income tested using the same 2026–27 tiers as the Medicare levy surcharge; for 1 July 2026 to 31 March 2027 the base-tier rebate is 24.118% when the oldest person on the policy is under 65, rising to 32.158% at 70 or over. Rates from 1 April 2027 are due to be published in March 2027.
R
- Registered tax agent
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A tax practitioner registered with the Tax Practitioners Board, and the only kind of person who can charge a fee to prepare and lodge a tax return. Most registered agents can use the ATO lodgment program to lodge after 31 October. Ross Accounting Pty Ltd is a registered tax agent, registration number 21430015.
S
- Self-managed super fund (SMSF)
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A super fund structured as a trust whose only purpose is paying retirement benefits to its members, who generally also act as its trustees (or as directors of a corporate trustee). An SMSF can have up to 6 members, and the trustees are personally responsible for complying with super and tax law, including an annual independent audit, even when they use professionals.
- Single Touch Payroll (STP)
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The mandatory system for reporting payroll information (wages, PAYG withholding and super) to the ATO each time employees are paid, using STP-enabled software. Employers finalise their STP data after 30 June, which marks employees' income statements as tax ready.
- Sole trader
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The simplest business structure: one person owns and runs the business and carries full legal responsibility for it, debts and losses included. A sole trader lodges using their individual TFN, pays tax personally on all the business income, has unlimited liability and must keep financial records for at least 5 years.
- Standard deduction (Instant tax deduction)
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A deduction of up to $1,000 for work-related expenses applied automatically from the 2026–27 income year to Australian residents who earn labour income such as wages, with no receipts needed. It is capped at the person's labour income, is reduced dollar for dollar by covered work-related expenses they claim, and does not apply to 2025–26 tax returns.
- Superannuation guarantee (SG)
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The minimum super an employer must contribute for eligible employees. The rate is 12% for 2026–27 (also 12% in 2025–26), and from 1 July 2026 it is calculated on each employee's qualifying earnings and paid each payday under Payday Super.
T
- Tax file number (TFN)
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A person's unique reference number (usually 9 digits) in the tax and super systems, which is free to apply for and kept for life. Without one, employers and banks must withhold more tax, and it is needed to lodge a tax return online or apply for an ABN.
- Tax offset (Tax rebate)
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An amount that reduces the tax payable on taxable income, rather than reducing the income itself as a deduction does. Most offsets are non-refundable, so they cannot take tax below zero, but some, such as the private health insurance rebate, are refundable.
- Taxable income
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The amount income tax is worked out on: assessable income minus allowable deductions. For full-year residents in 2026–27 who can claim the full tax-free threshold, the first $18,200 of taxable income is tax free under the ATO resident tax rates, and the Medicare levy is also calculated on taxable income.
- Trust
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An arrangement where a trustee is bound to hold property for the benefit of others, the beneficiaries. Legally it is a relationship, not a separate entity, yet the ATO deals with it as a taxpayer for administration purposes. As a general rule, each beneficiary pays tax on their share of the trust's net income even if the money has not been paid out to them.
- Trustee
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The person or company (a corporate trustee) that holds trust property for the beneficiaries and must act under the trust deed and the law. Under trust law, trustees are personally liable for the trust's debts, with a right to be indemnified from trust assets when acting properly, and are responsible for the trust's tax affairs such as registering it and lodging its returns.
- Trustee resolution (Distribution resolution)
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A trustee's decision making beneficiaries entitled to trust income for the year. To be effective for tax it generally must be made by 30 June (or earlier if the deed says so), while capital gains appointed from trust capital can be dealt with by 31 August; if a resolution is not effective, default beneficiaries or the trustee may be assessed instead, and a trustee may be taxed at the top rate.
U
- Unit trust
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A trust whose interests are divided into units held by investors. The trustee manages the trust assets and passes income and capital on to the unit holders in proportion to the number of units each one owns.
W
General information only, not personal advice. See our disclaimer.