Australian Tax Glossary

91 essential Australian tax terms explained in plain language. Updated for the 2025-26 financial year.

Tax Administration

Activity Statement

A form used by businesses to report and pay GST, PAYG withholding, PAYG instalments, and other tax obligations.

ATO (Australian Taxation Office)

The government agency responsible for administering Australia's tax and superannuation systems.

Australian Business Number (ABN)

A unique 11-digit number identifying a business entity to government and the community.

Financial Year

Australia's financial year runs 1 July to 30 June. FY 2025-26 = 1 July 2025 to 30 June 2026. Tax returns lodge after year-end via ATO myTax or tax agent.

myTax

The ATO's free online tool for individuals to prepare and lodge their own tax return through myGov.

Notice of Assessment (NOA)

An official ATO document confirming the outcome of your tax return, showing tax payable or refundable.

Tax Agent

A registered professional authorised by the Tax Practitioners Board to prepare and lodge tax returns on behalf of clients.

Tax File Number (TFN)

A unique 9-digit number issued by the ATO to identify individuals and organisations for tax purposes.

Tax Return

An annual form lodged with the ATO reporting your income, deductions, and tax payable or refundable for the financial year.

Income Tax

Assessable Income

All income you must report in your tax return, including salary, interest, dividends, rental income, and capital gains.

Effective Tax Rate

Your total tax as a percentage of your total income — the actual overall rate you pay after all brackets, offsets, and levies.

Exempt Income

Income that is not subject to tax and does not need to be included in your tax return.

Foreign Resident Tax Rates

Tax rates for individuals who are not Australian residents for tax purposes — no tax-free threshold and different brackets.

Income Tax

Tax levied by the federal government on your taxable income, calculated using progressive tax brackets.

Low and Middle Income Tax Offset (LMITO)

A now-expired tax offset of up to $1,500 that applied from 2018–19 to 2021–22, providing additional relief to low and middle income earners.

Low Income Tax Offset (LITO)

A non-refundable tax offset of up to $700 for individuals with taxable income below $66,667.

Marginal Tax Rate

The rate of tax applied to each additional dollar of income — determined by the tax bracket your top dollar falls into.

PAYG Instalments

Regular prepayments of tax on business or investment income that doesn't have tax withheld at source.

PAYG Withholding

The system where employers withhold income tax from employees' wages and remit it to the ATO throughout the year.

Senior Australians and Pensioners Tax Offset (SAPTO)

A tax offset of up to $2,230 (single) for eligible seniors and pensioners, effectively raising the tax-free income level.

Tax Brackets

The income ranges that determine the rate of tax applied to each portion of your taxable income.

Tax Offset (Rebate)

A direct reduction in the amount of tax you owe, different from a deduction which reduces taxable income.

Tax-Free Threshold

The first $18,200 of annual income that is not subject to income tax for Australian residents.

Taxable Income

Your assessable income minus allowable deductions — the figure used to calculate your income tax.

Medicare & Health

Medicare Levy

A 2% levy on taxable income to help fund Australia's public healthcare system, Medicare.

Medicare Levy Reduction

A reduction or exemption from the Medicare levy for low-income earners, certain pensioners, and specific categories of people.

Medicare Levy Surcharge (MLS)

An additional 1%–1.5% surcharge on higher-income earners who don't hold private hospital insurance.

Medicare Safety Net

A scheme that provides higher Medicare rebates once your out-of-pocket medical costs exceed certain annual thresholds.

Private Health Insurance Rebate

A government rebate that reduces the cost of private health insurance premiums, means-tested based on income and age.

Capital Gains Tax

50% CGT Discount

A 50% reduction in capital gains for individuals and trusts who held the asset for at least 12 months before disposal.

6-Year Absence Rule

Allows you to treat a former home as your main residence for CGT purposes for up to 6 years after moving out, even if rented.

Capital Gains Tax (CGT)

Tax on the profit made from selling or disposing of an asset, such as property, shares, or cryptocurrency.

Capital Loss

A loss made when you dispose of a CGT asset for less than its cost base — can offset capital gains but not other income.

CGT Event

A specific event that triggers a capital gains tax obligation, such as selling, gifting, or losing a CGT asset.

CGT Withholding (Foreign Residents)

A 12.5% withholding from the sale price when a foreign resident sells Australian property worth $750,000 or more.

Cost Base

The total cost of acquiring and holding an asset, used to calculate the capital gain or loss on disposal.

Principal Place of Residence (PPOR)

Your main home, which is generally exempt from capital gains tax when sold.

Small Business CGT Concessions

Special CGT concessions for small businesses with turnover under $2 million or net assets under $6 million, potentially reducing CGT to zero.

GST & Business

Business Activity Statement (BAS)

A form lodged with the ATO to report and pay GST, PAYG withholding, PAYG instalments, and other business tax obligations.

Company Tax Rate

The flat rate of tax applied to company profits — 25% for base rate entities (turnover under $50 million) and 30% for others.

Fuel Tax Credit

A credit for businesses that use fuel in heavy vehicles, machinery, equipment, or other eligible business activities.

Goods and Services Tax (GST)

A 10% broad-based consumption tax applied to most goods, services, and other items sold or consumed in Australia.

GST-Exclusive Price

The base price of a good or service before 10% GST is added.

GST-Free Supplies

Goods and services that are not subject to GST, but the supplier can still claim input tax credits on related business purchases.

GST-Inclusive Price

A price that already includes the 10% GST component. The GST amount is 1/11th of the inclusive price.

Input Tax Credit

A credit for GST included in the price of goods and services purchased for business use, offsetting GST collected on sales.

Sole Trader

An individual who runs a business in their own name, reporting business income and expenses in their personal tax return.

Superannuation

Carry-Forward Unused Cap

The ability to use unused concessional contribution cap amounts from the previous 5 years, if your total super balance is under $500,000.

Concessional Contributions

Before-tax super contributions taxed at 15% inside the fund, including employer SG, salary sacrifice, and personal deductible contributions.

Division 293 Tax

An additional 15% tax on concessional super contributions for individuals with income and super contributions above $250,000.

Downsizer Contribution

A contribution of up to $300,000 per person from the sale of a family home, available to those aged 55+, not counted towards caps.

Non-Concessional Contributions

After-tax super contributions that are not taxed inside the fund, with an annual cap of $120,000.

Preservation Age

The minimum age at which you can access your super savings, ranging from 55 to 60 depending on your date of birth.

Salary Sacrifice

An arrangement where you direct part of your pre-tax salary into super (or other benefits), reducing your taxable income.

Self-Managed Super Fund (SMSF)

A private super fund you manage yourself, with up to 6 members, offering full control over investment choices.

Spouse Super Contribution

A contribution made to your spouse's super fund that may entitle you to a tax offset of up to $540.

Super Co-contribution

A government contribution of up to $500 matched to personal after-tax super contributions for low-income earners.

Super Guarantee Charge

A penalty imposed on employers who fail to pay the correct SG contributions on time, including the shortfall, interest, and admin fees.

Superannuation Guarantee (SG)

The compulsory minimum percentage of an employee's ordinary time earnings that employers must contribute to their super fund.

Total Superannuation Balance

The total value of all your super interests across all funds, used to determine eligibility for various super concessions.

Transfer Balance Cap

The maximum amount of super you can transfer into a tax-free retirement phase income stream — $1.9 million for 2025–26.

HELP & Study Loans

Commonwealth Supported Place (CSP)

A university place where the government subsidises part of the tuition cost, with the student paying a reduced "student contribution".

HELP Indexation

Annual adjustment of HELP debt balances on 1 June, using the lower of CPI or Wage Price Index since 2023.

HELP/HECS Debt

A government loan for tertiary education tuition fees, repaid through the tax system once your income exceeds the minimum threshold.

Repayment Income

The income measure used to calculate compulsory HELP/HECS repayments — taxable income plus other adjustments.

VSL (VET Student Loans)

Government loans for students undertaking eligible vocational education and training (VET) courses at diploma level and above.

Property & Stamp Duty

Capital Works Deduction

A deduction for the construction cost of a building or structural improvement, typically claimed at 2.5% per year over 40 years.

Depreciation (Rental Property)

Tax deductions for the declining value of a rental property's building structure and plant & equipment (fixtures and fittings).

First Home Owner Grant (FHOG)

A state/territory government grant for first home buyers, typically $10,000–$30,000 for new homes, with varying eligibility criteria.

First Home Super Saver (FHSS)

A scheme allowing first home buyers to save for a deposit inside super, benefiting from lower super tax rates on contributions.

Land Tax

An annual state/territory tax on the value of land you own, excluding your principal place of residence in most states.

Negative Gearing

When the costs of owning an investment property (interest, expenses) exceed the rental income, creating a tax-deductible loss.

Rental Income

Income received from renting out a property, which must be declared as assessable income in your tax return.

Stamp Duty (Transfer Duty)

A state/territory tax on property purchases, calculated as a percentage of the property value — rates vary by jurisdiction.

Investments & Dividends

Dividend Reinvestment Plan (DRP)

A plan that automatically reinvests your dividends or distributions into additional shares or units instead of paying cash.

ETF Distribution

Income distributed by an exchange-traded fund (ETF) to its unit holders, with tax components similar to managed fund distributions.

Franking Credits (Imputation Credits)

Tax credits attached to dividends representing company tax already paid on the profits, preventing double taxation.

Fully Franked Dividend

A dividend where the company has paid the full company tax rate on the underlying profits, with maximum franking credits attached.

Managed Fund Distribution

Income distributed to unit holders of a managed investment fund, which may include dividends, interest, capital gains, and tax credits.

Partially Franked Dividend

A dividend where only part of the underlying profits have been taxed in Australia, so only partial franking credits are attached.

Trust Distribution

Income distributed from a trust to its beneficiaries, who include it in their own tax returns at their individual tax rates.

Unfranked Dividend

A dividend paid from profits on which no Australian company tax has been paid, so no franking credits are attached.

Work & Deductions

Donation Deductions

Tax deductions for gifts and donations of $2 or more to organisations registered as deductible gift recipients (DGRs).

Fixed Rate Method

A simplified method for claiming work from home expenses at 67 cents per hour, covering a range of running expenses.

Instant Asset Write-Off

Allows eligible businesses to immediately deduct the full cost of eligible depreciating assets, rather than depreciating over time.

Motor Vehicle Expenses

Tax deductions for work-related car use, claimable using the cents per kilometre method (85 cents/km up to 5,000 km) or logbook method.

Self-Education Expenses

Deductions for education expenses that are directly related to your current employment or likely to increase your income in your current role.

Travel Expenses (Work-Related)

Deductions for travel costs incurred for work purposes, including accommodation, meals, and transport when travelling away from home overnight.

Uniform & Clothing Deductions

Tax deductions for buying, cleaning, and maintaining work-related uniforms, protective clothing, and occupation-specific clothing.

Union & Professional Fees

Tax deductions for union membership fees and subscriptions to professional associations related to your current employment.

Work From Home Deductions

Tax deductions for expenses incurred when working from home, claimable using the fixed rate method or actual cost method.