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  • Glossary



    Accrual revenue

    Accrual revenue is based on the 'economic transaction method' and reflects the tax liabilities for the period in which an economic activity actually occurred. This approach facilitates comparison with economic events in the same period.  


    Tax avoidance occurs when taxpayers exploit the tax laws to gain an advantage. Such transactions generally serve no commercial purpose and are entered into merely to obtain a tax benefit that was not intended by parliament. The extent to which tax avoidance is included in the tax gap depends on whether it is contestable.

    Australian Bureau of Statistics (ABS)

    The ABS is the statistical agency of the Australian Government. It provides statistics on a wide range of economic, environmental and social issues, to assist and encourage informed decision making, research and discussion within governments and the community.

    Australian National Accounts

    Economic statistics produced by the ABS on income, expenditure and production in the economy.

    Beer excise and duty

    A tax imposed on the manufacture or importation of beer in Australia. Imported beer is subject to customs duty at a rate equivalent to excise to ensure it is treated consistently with goods manufactured in Australia. These imported goods are referred to as excise equivalent goods (EEGs).

    Business activity statement

    A business activity statement (BAS) is the form lodged by businesses on a monthly, quarterly or annual basis to report certain tax obligations, including fringe benefits tax, luxury car tax, wine equalisation tax and GST.

    Bottom-up approach

    A bottom-up approach is a detailed examination of specific data sources (typically individual tax returns through audit or review), to determine the extent of non-compliance across the whole population. The data sources can range from tax returns, audit data, risk registers or data matching. These methods are typically used for direct taxes.


    Compliance means in accordance with established legislation and the intent and spirit of the tax law.

    Compliance activities

    Direct interventions that we initiate to ensure taxpayers comply with their tax and superannuation obligations.


    Refers to mistakes made in submitting information to the ATO, including when lodging a tax return. An error can be intentional or unintentional.


    Excise is a tax on alcohol, tobacco, fuel and petroleum products produced or manufactured in Australia. Collectively, these products are referred to as excisable goods.

    Excise equivalent goods

    Imported alcohol, tobacco, fuel and petroleum products (including LPG, LNG and CNG) are subject to duty are treated consistently with goods manufactured in Australia. These imported goods are referred to as excise equivalent goods (EEGs).


    The act of evading tax obligations. Tax evasion occurs when people break the law by not reporting all of their income, or dishonestly overstating deductions to reduce the amount of tax they need to pay. Examples of tax evasion include underreporting income, not reporting cash wages, not lodging tax returns or not paying employee superannuation entitlements.

    Excise clearance data

    The excisable units (litres, numbers or kilograms) of excisable products cleared for home consumption and reported by excise clients on their excise return.

    Failure to take reasonable care

    Failure to take reasonable care occurs when a taxpayer does not do what a reasonable person in the same circumstances would have done. Circumstances include age, health, knowledge and education.


    Fraud refers to wrongful or criminal deception intended to result in financial or personal gain. This includes claiming tax refunds and money laundering, using false or stolen identities; claiming GST credits for goods or services that GST was not paid on, and claiming deductions for expenses not incurred or legally deductible.

    Gross domestic product

    Gross domestic product (GDP) refers to the total market value of goods and services produced in a country in a given year, net of the cost of goods and services used to produce those goods and services.

    Gross tax gap

    The gross tax gap is the net gap plus the amount of revenue we raise and collect through our compliance activities.

    Luxury car tax (LCT) payable

    LCT payable is the amount of luxury car tax payable, as reported at label 1E on the business activity statement.

    Net tax gap

    The net tax gap is the difference between theoretical tax according to the law, and actual tax paid voluntarily or collected as a result of compliance activities.

    Non-observed economy

    Often referred to as the 'cash economy', the non-observed economy refers to economic activity which is not declared in an attempt to avoid tax obligations. National Accounts data makes a small allowance for expenditure associated with the 'underground economy' (cash economy transactions, transactions relating to other avoidance measures, and understatement of income in ABS surveys).


    Non-payment refers to debts to the ATO that have been written off or are currently outstanding.

    Pay as you go (PAYG) withholding

    PAYG withholding is the value of income tax withholding payable by employers on employee salary and wages. Other withholding not from salary and wages (including non-resident interest, dividend or royalty withholding, no-ABN and no-TFN) are excluded.

    Petroleum and diesel excise and duty

    Petroleum and diesel excise is a tax on fuel and petroleum products (excisable goods) produced or manufactured in Australia. Imported fuel and petroleum products are subject to customs duty at a rate equivalent to excise to ensure they are treated consistently with goods manufactured in Australia. These imported goods are referred to as excise equivalent goods (EEGs).

    Pillars of compliance

    The four pillars of compliance are: correctly registering in the system; lodging tax information on time; reporting complete and accurate information; and paying tax obligations on time.

    Tax gap

    The tax gap is an estimate of the difference between the amount of tax theoretically payable (assuming full compliance by all taxpayers) and the amount actually reported or collected for a defined period.

    Top-down approach

    A top-down approach uses independent aggregated data sources to estimate the size of the theoretical tax base. These methods typically are used for indirect taxes.

    Value-added tax (VAT)

    VAT is a tax on consumer spending. The tax is placed on a product or service when there is value added at the stage of production or at the final sale to the consumer. Each business in the supply chain charges VAT on their sales and is entitled to a refund of VAT paid on their inputs or purchases. Australia’s GST is a value added tax on goods and services for domestic consumption.

    Voluntary compliance ratio

    The voluntary compliance ratio (VCR) is an estimate of the proportion of taxpayers that voluntarily comply with their tax obligations under the four pillars of compliance.

    Wine equalisation tax (WET)

    WET is a tax on wine consumed in Australia. It is based on the value of the wine sold and generally applies to the last wholesale sale (usually between the wholesaler and the retailer) although it may apply in other circumstances.

      Last modified: 05 Nov 2015QC 47278