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  • Key tax and super terms

    The list below includes the definitions for common tax and super terms we use in Australia.

    See also:

    Term

    Definition

    ATO online services

    You can access some of our services online. You can:

    • update your personal details
    • see your income statement
    • see your tax information
    • lodge your tax return online
    • pay your tax debt
    • see, manage and access your super
    • manage your lodgments as a sole trader, such as pay as you go (PAYG) and Business activity statements (BAS).

    To use ATO online services you will need a myGov account.

    Australian Business Number, ABN

    A number that a business uses to identify themselves when dealing with other business or with government.

    Authorised representative

    A person who can speak to us about your tax or super. You must officially let us know that you want them to speak to us for you. They can be a family member, a friend or a tax agent.

    Business activity statement, BAS

    A form some businesses use to report and pay their taxes such as goods and services tax (GST) and pay as you go (PAYG). This form can also be called an Activity statement.

    Centrelink

    Centrelink is an Australian Government program that delivers a range of government (social security) payments and services.

    Company

    One of four ways you can structure a business. Companies must have a tax file number (TFN). They may need to have an Australian business number (ABN). The company is owned by any number of people. These people are called shareholders. If the company gets into debt shareholders do not have to use their own money to pay the debt.

    Contractor

    A contractor runs their own business doing work for other businesses or people. They are not an employee. If you are a contractor, you decide how you do your work. You are paid for what you do, not for how long it takes you. You can pay someone else to do your work. This person would be called a sub-contractor.

    Deduction

    Sometimes you have to buy things like tools or special clothing to help you do your job.

    The cost of some of these things can be used to reduce your taxable income. This is called a deduction.

    If you want to claim a deduction you must keep a record of what you bought. The record could be a receipt or a tax invoice.

    You cannot claim a deduction if your employer:

    • bought the thing for you
    • gave you money after you bought it (this is called a reimbursement).
     

    Earn, Earned, Earnings

    Money you get from:

    • work you do
    • services you provide
    • investments you own, for example, shares or rent from a property.
     

    Employee

    A person who works for another person, business or organisation to earn money. They are told what work to do and how to do it.

    Employer

    A person or business that employs people (workers).

    Expense

    The amount of money you spend on a product or service. Some expenses can be claimed as deductions.

    Financial year

    In Australia the financial year is from 1 July to 30 June.

    Fringe benefits tax, FBT

    Some employers give their workers benefits related to their work. Examples could be a company car or private health care. These are called fringe benefits.

    If your employer gives you fringe benefits, they may have to pay more tax.

    Goods and services tax, GST

    A tax of 10% which is part of the price of most products and services. The seller holds on to the tax and then pays it to us.

    Income

    The money you earn from activities like:

    • work
    • investments
    • selling assets.
     

    Income statement

    An income statement shows how much you earned and how much tax you paid in a financial year. It can also be called a Payment summary. You can see your income statement in ATO online services.

    Income tax

    The amount of tax you have to pay based on your taxable income. This is also called tax payable.

    Investment

    Using money or things you own to make more money. Examples are putting money in a bank account to earn interest, buying shares or buying a property to rent out.

    Invoice

    A document that gives details of what was bought and sold.

    An invoice must be labelled as a tax invoice. It needs to include:

    • your business name
    • your ABN
    • the date you sold the product or service
    • words to describe the products or services, the number sold and the price for each item
    • which products or services included GST in the price
    • the total GST amount.
     

    Lodge, Lodgment

    Sending prepared documents, like your tax return or Business activity statement, to the Australian Taxation Office (ATO).

    Medicare

    Medicare is an Australian Government program that gives Australians, and some people from overseas, a wide range of health and hospital services at no cost or low cost.

    Medicare is paid by a levy on a person's taxable income.

    myGov

    A myGov account lets you access a range of Australian Government services online with one username and password.

    Partnership

    One of four ways you can structure a business. A partnership is two or more people who run a business together.

    Pay as you go (PAYG) withholding

    When an employer pays their employees or contractors they hold back (withhold) some money, which is the tax amount. The employer then sends the tax to us.

    Pay slip

    A document your employer gives you each time they pay you. It shows how much you were paid and how much tax was sent to us.

    Receipt

    A document which shows how much you paid for something and the date you bought it. It may also show how much GST was included in the price.

    Retire

    To retire means you plan to never work full-time again.

    To use your super when you retire you must be older than a certain age (this is called a preservation age).

    Scam

    A scam is a trick to get you to:

    • pay money
    • share information about yourself that then helps someone pretend to be you.
     

    Sole trader

    One of four ways you can structure a business. A sole trader is a person who owns and operates a business for their own benefit. A sole trader may have employees.

    Super, Superannuation

    Superannuation, or 'super', is your money. If you are eligible for super, your employer must pay it into the super fund you choose. You will use your super money to live on when you retire.

    Super contribution

    Money that you or your employer puts into your super fund.

    Super fund

    An account into which you or your employer puts money while you are working. You can use the money when you retire or if you are living with a disability and can't work anymore.

    Super guarantee

    This is the minimum amount of super your employer has to pay into your super fund. It is a minimum amount based on the current super guarantee rate of your ordinary time earnings.

    For example, Mary earns $1,000 a week (before tax is taken out). The super guarantee amount is worked out as $1,000 x the super rate. This amount is paid by Mary's employer on top of Mary's earnings.

    Tax

    Tax is money people and businesses pay to the Australian Government. It is used to provide services we all need, such as:

    • hospitals and Medicare benefits
    • education
    • defence
    • roads and public transport
    • pensions and Centrelink benefits.


    You may need to pay tax if you get income from:

    • a job
    • Centrelink allowances and payments
    • running a business
    • investments.
     

    Tax agent

    A person or business that you pay to manage your tax and super. Only a registered agent can ask to be paid for their services. If they are registered it means that they know what they need to do to be a tax agent. You can find a registered tax agent on the Tax Practitioner's Board websiteExternal Link.

    Tax concession

    Tax concessions are benefits for some groups of people or businesses. The benefits can include:

    • not having to pay as much tax
    • being able to lodge a tax return at a later date.
     

    Tax debt

    When you owe us money. For example, if you did not pay enough tax during the year you will owe us money.

    Tax file number, TFN

    Your tax file number (TFN) is your personal identification number in our tax system. This is the number we and your employer use to keep track of how much tax you have paid.

    You keep the same TFN for life, even if you change your name or address, change jobs, or move interstate or overseas.

    Keep your TFN safe. Do not let anyone else use your TFN – not even friends or relatives.

    Tax file number (TFN) declaration

    When you start a new job your employer will ask you to fill out a form called a Tax file number declaration.

    Your employer uses the information to work out how much tax to take out of your pay. This is called pay as you go (PAYG) withholding. Your employer pays this tax to us.

    If you do not fill out the TFN declaration form your employer will take more tax out of your pay than you may need to pay. You should get this extra tax back as a tax refund when you lodge your tax return.

    Tax Help

    A free service we run to help people with low income to prepare and lodge their tax return.

    Tax offset

    Some people and businesses are eligible for tax offsets. A tax offset reduces how much tax you pay. A tax offset can also be called a tax rebate.

    Tax rate

    The amount of tax you pay out of each dollar you earn. Your tax rate depends on your circumstances.

    Tax refund

    If you paid more tax than you needed to in a financial year, we will give the money back to you.

    Tax return

    A form you fill in each year and give to us. In the form you tell us how much money you earned and how much tax you have already paid.

    You also tell us about deductions you want to claim. You need to have records (receipts or invoices) to prove what you tell us.

    Most people need to lodge us a tax return each year.

    We will work out if you have paid the right amount of tax. If you have paid too much, we will give money back to you (a tax refund). If you have not paid enough tax you will have to pay more (a tax debt).

    Tax withheld

    This is the amount of money that employers take out of your pay and give to us.

    Tax-free threshold

    If you are an Australian tax resident, the first $18,200 you earn is not taxed. This is called the tax-free threshold. Foreign residents cannot claim the tax-free threshold.

    When you start a new job and fill out the TFN declaration form you tick a box to claim the tax-free threshold.

    If you work in more than one job you should claim the tax-free threshold from the employer you earn the most money from.

    If you think you will earn less than $18,200 from all of your jobs you can claim the tax-free threshold from all your employers.

    Taxable income

    The total income you earned in a financial year after you have taken away the deductions you can claim.

    Trust

    One of four ways you can structure a business. A trust is a person or company that looks after assets (like money or investments) so that other people can receive income from the assets. The people who receive the income are called beneficiaries.

     

     

     

     

      Last modified: 30 Jun 2021QC 61176