Understanding the taxation terminology isn’t easy. Below are some frequently used terms:

Aggregated turnover (annual turnover): Is your business's yearly turnover plus the yearly turnover of any businesses you are connected or affiliated with.

Annual turnover is used to work out whether you can:

  • elect to account on a cash basis
  • make an annual private apportionment election
  • choose to pay GST by instalments.

ATO: Australian Tax Office The income tax system is administered by the ATO, which is headed by the Commissioner of Taxation, three Second Commissioners and a number of First Assistant Commissioners. The National Office is located in Canberra. The day-to-day work of administering the taxation system is generally carried out by decentralised branch offices which are headed by a Deputy Commissioner.

Australian Business Number (ABN): The Australian Business Number (ABN) is a single identifier for all business dealings with the tax office and for dealings with other government departments and agencies.

Business Activity Statement (BAS): Businesses use an activity statement to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Activity statements are also used by individuals who need to pay quarterly PAYG instalments.

Business asset: Is a thing you use for purposes of your business, for example, manufacturing equipment, a delivery van or an office computer. Intangible items, such as goodwill may also be business assets. You generally incur a GST liability when you sell a business asset.

Business Benchmarks: Benchmarks provide a snapshot of how businesses in an industry are performing, on average, by providing a measure of various business costs in relation to turnover.

Capital Allowances:Capital allowance measures contain the rules for calculating the decline in value of depreciating assets. New provisions operate from 1 July 2001 and apply to depreciating assets acquired both before and after that date. The new provisions consolidate a range of former capital allowance measures.

Capital Gains Tax: Capital gains tax (CGT) is the tax you pay on a capital gain. It is not a separate tax, just part of your income tax. The most common way you make a capital gain (or capital loss) is by selling assets such as real estate, shares or managed fund investments. Managed funds also distribute capital gains you must report.

Deductible gift recipient (DGR): Is a fund or organisation that can receive tax deductible gifts.

Deductions - business: Deductions for costs incurred in running your business are allowable, provided the expenses are not of a private, domestic or capital nature.

Deductions - individuals: This link will help you identify what you can claim to reduce your taxable income.

Demerger: A demerger is a form of restructure in which investors in the head entity (for example, shareholders or unitholders) gain direct ownership in an entity that they formerly owned indirectly (the ‘demerged entity’). Underlying ownership of the companies and/or trusts that formed part of the group does not change. The company or trust that ceases to own the entity is known as the ‘demerging entity’.

Depreciating Asset: Is defined as an asset that has a limited effective life and that is reasonably expected to decline in value over the time it is used.

Division 7A: Division 7A may apply to private companies that make tax-free distributions to shareholders or shareholders' associates in the form of payments, loans or debts forgiven.

Employee share options:

Financial Arrangement: Broadly means a scheme entered into or undertaken to raise finance for an entity or a connected entity, or to fund another financing arrangement.

Gainfully Employed:  Means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.

GST (Goods and Services Tax): GST is an indirect, broad-based consumption tax.

  • Indirect means that it is levied on the supply of goods, services or activities, rather than directly on income. Other indirect taxes include stamp duty.
  • Consumption tax means that instead of being applied to income (as measured by the amounts that are received), GST is applied to consumption (as measured by the amounts that are spent). The tax is ultimately borne by consumers, not by producers or suppliers.
  • A broad-based tax applies generally to all transactions by all types of taxpayers, with only limited exceptions. It can be contrasted with taxes such as sales tax, which was generally limited to transactions involving sales, and transactions involving certain types of goods.

GST-free sales: Some goods and services (excluding input taxed sales) are not subject to GST and are sold without GST in their price. These sales are referred to as GST-free sales. Examples of GST-free sales include basic food, exports, sewerage and water, the sale of a business as a going concern, non-commercial activities of charities and most education and health services. If you sell GST-free goods or services you are entitled to credits for the GST included in the price of your purchases that relate to your GST-free goods or services. See also 'Input taxed sales' and 'Taxable sales'.

Input taxed sales: Some goods and services (other than GST-free supplies) are sold without GST in their price, even though GST has been included in the price of the inputs used to make or supply them. These sales are referred to as input taxed sales. If you make an input taxed sale you are not entitled to credits for the GST in the price of your 'inputs' (the goods or services you used to make the goods or services you sold).

Two of the most common types of input taxed sales are:

  • financial sales (supplies)
  • supplies of residential premises by way of rent or sale.

Last retirement day: This term means:

  • if an individual’s employment or office would have terminated when he or she reached a particular age or completed a particular period of service — the day he or she would reach the age or complete the period of service (as the case may be), or

  • in any other case — the day on which he or she would turn age 65

Limited partnership: This is

  • an association of persons (other than a company) carrying on business as partners or in receipt of ordinary income or statutory income jointly, where the liability of at least one of the persons is limited, or
  • an association of persons with a separate legal personality that was formed solely for the purpose of becoming a venture capital limited partnership (VCLP), an early stage venture capital limited partnership (ESVCLP), an Australian venture capital fund of funds (AFOF) or a venture capital management partnership (VCMP) 

Medicare Levy: Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, resident taxpayers pay a Medicare levy. The amount of levy you pay is based on your taxable income and is in addition to your income tax. It isn’t reduced by any tax offsets you may be entitled to unless they are refundable tax offsets.

Notice of Assessment:  When you lodge a tax return, we process it and work out whether you have paid the right amount of tax, have a tax debt or are due for a refund because you have paid more that than you need to. We let you know the result of our assessment by sending you a notice of assessment.  The notice of assessment will state your taxable income, show how much tax you have paid during the year, and show whether you owe the Tax Office money, have paid enough tax, or are due for a refund.

Pay as you go (PAYG): Is the way the Tax Office collects tax from you through the income year. There are two components to it.

Pay as you go withholding: is the way you pay your tax through the year if you are an employee. Your payer will withhold tax from your pay each pay period in line with the information you supply on your tax file number declaration form. If you are receiving Centrelink payments you also pay your tax through PAYG withholding.  Your payer sends the tax to the Tax Office for you. Ideally at the end of the year you should have already paid the right amount of tax for the income you have received.

Pay as you go instalments: Is the way you pay tax through the year on significant amounts of interest, rent or dividend income. Tax is not withheld from these types of income so PAYG instalments is a way you can pay it in instalments during the year. Generally you pay four instalment payments during the financial year but in some circumstances you make only one payment. You will need to complete an instalment activity statement (IAS) if you are part of the PAYG instalments system. Once you are part of the system we post the forms to you.

Small Business and general business tax break: The small business and general business tax break provides an additional tax deduction for expenditure on certain qualifying assets. It provides a bonus deduction of 50% for small business and 30% or 10% for all other businesses providing certain eligibility criteria are met.

Tax invoice: A tax invoice is a document generally issued by the seller for a taxable supply. It shows information about the seller, the price of the sale and may show the amount of GST paid.

Taxable sales: The sale of goods and services that are subject to GST (that is, things that must have GST in their price) are referred to as 'taxable sales'.

You make a taxable sale if you are registered or required to be registered for GST and:

  • you make the sale for payment
  • you make the sale in the course or furtherance of a business (enterprise) you carry on, and
  • the sale is connected with Australia.

However, the sale is not taxable to the extent that it is GST-free or input taxed. Therefore sometimes a sale might be a mix of taxable as well as GST-free or input taxed. When you make a taxable sale you must include GST for the taxable sale in your price and you are entitled to claim credits for the GST in the price of your purchases relating to the taxable sale.

Source: CCH Australia; ATO