Australian Tax Glossary

Clear definitions of Australian tax terms and concepts. Updated for the 2025-26 financial year.

Income Tax

Income Tax: Tax paid on your taxable income in Australia. Uses progressive tax brackets where higher income is taxed at higher rates. The tax-free threshold is $18,200 for Australian residents.
Tax Brackets: Income ranges taxed at different rates. For 2025-26: 0% up to $18,200, 16% from $18,201-$45,000, 30% from $45,001-$135,000, 37% from $135,001-$190,000, and 45% above $190,000.
Marginal Tax Rate: The tax rate applied to the last dollar of income earned. In Australia's progressive system, only income within each bracket is taxed at that rate.
Tax-Free Threshold: The amount of income you can earn before paying any income tax. For Australian residents, this is $18,200 per financial year.
Taxable Income: Your assessable income minus allowable deductions. This is the amount used to calculate your income tax liability.

Medicare Levy: A 2% levy on taxable income to help fund Australia's public health system. Low-income earners may pay a reduced rate or be exempt.
Medicare Levy Surcharge (MLS): An additional tax of 1-1.5% for higher income earners who don't have private hospital cover. Applies to singles earning over $101,000 or families over $202,000.

Capital Gains Tax (CGT): Tax on the profit when you sell an asset for more than you paid. In Australia, capital gains are added to your taxable income. Assets held over 12 months may qualify for a 50% discount.
50% CGT Discount: Australian residents who hold an asset for at least 12 months before selling can reduce their capital gain by 50%. Only half of the gain is added to taxable income.
Cost Base: The original cost of an asset plus any costs of acquisition, improvement and disposal. Used to calculate capital gains when the asset is sold.
Capital Loss: A loss incurred when you sell an asset for less than its cost base. Capital losses can only offset capital gains, not other income. Unused losses can be carried forward.
Principal Place of Residence (PPOR): Your main home where you live. Generally exempt from capital gains tax when sold, known as the main residence exemption.
6-Year Absence Rule: If you move out of your main residence and rent it out, you can treat it as your main residence for CGT purposes for up to 6 years. You can only claim this for one property at a time.

Goods and Services Tax (GST): A 10% tax on most goods, services and other items sold or consumed in Australia. Businesses with turnover over $75,000 must register for GST.
GST-Inclusive Price: The total price including the 10% GST component. Australian Consumer Law requires most retail prices displayed to consumers to be GST-inclusive.
GST-Exclusive Price: The base price before GST is added. Business-to-business invoices often show prices this way, with GST as a separate line item.
Input Tax Credit: A credit for GST paid on business purchases. GST-registered businesses can claim back GST paid on eligible business expenses.

Salary Sacrifice: An arrangement to redirect pre-tax salary into superannuation or other benefits. Reduces taxable income and can lower tax paid, but contributions count toward the $30,000 concessional cap.
Concessional Contributions: Super contributions taxed at 15% in the fund, including employer contributions and salary sacrifice. The annual cap is $30,000 for 2025-26.
Non-Concessional Contributions: After-tax contributions to super that are not taxed in the fund. The annual cap is $120,000 (or $360,000 using bring-forward rule).
Division 293 Tax: An additional 15% tax on concessional super contributions for high income earners (income plus super contributions over $250,000). Total tax on super contributions becomes 30%.

HELP/HECS Debt: Higher Education Loan Program debt for university fees. Repayments are compulsory through the tax system once income exceeds $67,000 (2025-26). Uses marginal rates on income above the threshold.
Repayment Income: The income used to calculate HELP repayments. Includes taxable income plus reportable fringe benefits, reportable employer super contributions, and net investment losses.

Stamp Duty (Transfer Duty): A state government tax paid when buying property. Rates and exemptions vary by state. First home buyers often qualify for concessions or exemptions.
First Home Super Saver (FHSS): A scheme allowing first home buyers to save for a deposit inside superannuation. Voluntary contributions (up to $15,000/year, $50,000 total) can be withdrawn with tax benefits.
Negative Gearing: When the costs of owning an investment property exceed the rental income. The loss can be deducted from other taxable income, reducing overall tax.

Franking Credits (Imputation Credits): Tax credits attached to dividends from Australian companies that have already paid company tax. Reduces your tax liability and may result in a refund if your tax rate is below 30%.
Fully Franked Dividend: A dividend where the company has paid 30% company tax on the profits. The franking credit (30% of the dividend) can be used to offset your personal tax.
Unfranked Dividend: A dividend paid from profits that have not been taxed at the company level (e.g., foreign income). No franking credit is attached.

Work From Home Deductions: Tax deductions for expenses incurred working from home. The ATO offers a fixed rate of 70 cents per hour, or you can calculate actual costs for electricity, internet, and equipment.
Fixed Rate Method: A simplified method to claim work from home deductions at 70 cents per hour worked. Covers running costs like electricity and internet. Equipment and phone are claimed separately.