Australian Tax Glossary

Clear definitions of 65 Australian tax terms and concepts. Updated for the 2025-26 financial year.

Tax Administration

ATO (Australian Taxation Office): The Australian Government agency responsible for administering the tax and super systems. Collects income tax, GST, and super guarantee, and distributes payments like the Family Tax Benefit.
Tax File Number (TFN): A unique 9-digit number issued by the ATO to individuals and organisations. Required for employment, banking, and tax returns. Without a TFN, tax is withheld at the highest marginal rate.
Australian Business Number (ABN): An 11-digit identifier for businesses operating in Australia. Required for GST registration, invoicing, and to avoid PAYG withholding on contractor payments.
Tax Return: An annual form lodged with the ATO reporting your income, deductions, and tax offsets. Due by 31 October each year (or later if using a registered tax agent). Most individuals lodge via myTax.
myTax: The ATO's free online tax return tool accessed through myGov. Pre-fills income from employers, banks, and government payments, making it the simplest way for most individuals to lodge.
Notice of Assessment (NOA): A document issued by the ATO after processing your tax return. Shows your taxable income, tax assessed, credits applied, and whether you receive a refund or have a balance owing.
Financial Year: The Australian tax year runs from 1 July to 30 June. For example, the 2025-26 financial year runs from 1 July 2025 to 30 June 2026. Tax returns are lodged after the financial year ends.

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.
Effective Tax Rate: Your total tax divided by your total taxable income, expressed as a percentage. Always lower than your marginal rate because of the progressive bracket system and the tax-free threshold.
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.
PAYG Withholding: Pay As You Go withholding — the system where employers deduct tax from employees' pay and remit it to the ATO. The amount withheld is based on the employee's TFN declaration and tax tables.
PAYG Instalments: Quarterly prepayments of expected income tax for individuals with investment or business income. The ATO calculates the instalment amount or rate based on your most recent tax return.
Tax Offset (Rebate): A direct reduction of your tax payable (not your taxable income). Common offsets include the Low Income Tax Offset (LITO), Senior Australians and Pensioners Tax Offset (SAPTO), and private health insurance rebate.
Low Income Tax Offset (LITO): A tax offset of up to $700 for individuals earning $45,000 or less. Phases out between $45,001 and $66,667, reaching zero above that. Applied automatically when your tax return is assessed.
Foreign Resident Tax Rates: Non-residents pay tax from the first dollar of Australian-sourced income with no tax-free threshold. The rates are 30% up to $135,000, 37% up to $190,000, and 45% above $190,000 (2025-26).

Medicare & Health

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.
Medicare Levy Reduction: Low-income earners below certain thresholds pay a reduced Medicare levy or none at all. For 2025-26, individuals earning under $26,000 may qualify for a reduction.
Private Health Insurance Rebate: A government rebate that reduces the cost of private health insurance premiums. The rebate percentage depends on your age and income, ranging from 8.202% to 32.812% of premiums paid.

Capital Gains Tax

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.
CGT Event: A transaction or event that triggers a capital gain or loss. The most common is selling an asset (CGT event A1), but other events include gifting, losing, or destroying an asset.

GST & Business

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.
Business Activity Statement (BAS): A form submitted to the ATO (monthly or quarterly) to report and pay GST, PAYG withholding, PAYG instalments, and other tax obligations. GST-registered businesses must lodge a BAS.
Sole Trader: An individual running a business on their own. Business income is reported on the individual's personal tax return. Sole traders use their own TFN and are personally liable for all business debts.
Company Tax Rate: Companies pay a flat tax rate on their taxable income: 25% for base rate entities (aggregated turnover under $50 million) or 30% for all other companies. This is separate from personal income tax.

Superannuation

Superannuation Guarantee (SG): The minimum percentage of ordinary time earnings that employers must contribute to an employee's super fund. The SG rate is 12% for 2025-26 and is legislated to remain at 12%.
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).
Carry-Forward Unused Cap: If you don't use your full $30,000 concessional contributions cap, the unused amount carries forward for up to 5 years. Available if your total super balance is under $500,000 at 30 June of the previous year.
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%.
Self-Managed Super Fund (SMSF): A private super fund you manage yourself, with up to 6 members. Offers control over investments but comes with strict compliance obligations, annual audits, and ATO reporting requirements.
Preservation Age: The age at which you can access your super savings if you've retired. Currently 60 for anyone born after 1 July 1964. You cannot withdraw super before this age except in limited hardship cases.
Super Co-contribution: A government payment of up to $500 into your super if you make personal after-tax contributions and earn less than $60,400 (2025-26). Reduces by 3.333 cents for each dollar above $45,400.

HELP & Study Loans

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.
VSL (VET Student Loans): Government loans for students in approved vocational education and training (VET) courses. Works similarly to HELP — no upfront fees, with compulsory repayments through the tax system once income exceeds the threshold.

Property & Stamp Duty

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.
Land Tax: An annual state government tax on the value of land you own (excluding your principal residence in most states). Rates and thresholds vary by state. Calculated on the unimproved value of the land.
Depreciation (Rental Property): A tax deduction for the decline in value of a rental property's building structure (capital works at 2.5% per year) and its fixtures and fittings (plant and equipment). Requires a depreciation schedule from a quantity surveyor.
Capital Works Deduction: A tax deduction of 2.5% per year for the construction cost of a rental property's building structure, spread over 40 years. Only available for properties built after 15 September 1987.

Investments & Dividends

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.
Partially Franked Dividend: A dividend where only part of the profit has been taxed at the company level. The franking credit is proportional — e.g., a 50% franked dividend carries half the credit of a fully franked one.
Trust Distribution: Income distributed from a family or investment trust to its beneficiaries. Each beneficiary includes their share of the trust's income in their own tax return and pays tax at their personal rate.

Work & Deductions

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.
Motor Vehicle Expenses: Tax deductions for using your car for work purposes (not commuting). You can claim using the cents per kilometre method (85 cents/km up to 5,000 km) or the logbook method for actual costs.
Self-Education Expenses: Deductions for education expenses that directly relate to your current employment. The course must maintain or improve skills required for your current job — you cannot claim for courses to get a new job.
Uniform & Clothing Deductions: You can claim deductions for occupation-specific clothing, protective clothing, or registered uniforms. Conventional clothing (suits, everyday wear) cannot be claimed even if required for work.
Donation Deductions: Tax deductions for gifts of $2 or more to registered deductible gift recipients (DGRs). The donation must be genuinely voluntary with no material benefit received in return.