Tax Law glossary
Australian tax law is governed by the Income Tax Assessment Act 1936 and 1997, the GST Act, and a range of administrative and anti-avoidance provisions. This glossary covers 40 commonly used terms.
This is a glossary of 40 key terms used in Australian tax law practice. Each entry has a plain-English definition and, where relevant, a citation to the Income Tax Assessment Acts or Taxation Administration Act.
Definitions
Allowable deduction
An amount that can be subtracted from assessable income in calculating taxable income under section 8-1 of the 1997 Act.
Amended assessment
An assessment issued by the Commissioner of Taxation correcting or adjusting an earlier assessment, within the amendment period.
Assessable income
Ordinary and statutory income that must be included in a taxpayer's assessable income for the year.
ATO
The Australian Taxation Office — the agency administering the Commonwealth taxation system on behalf of the Commissioner of Taxation.
Base rate entity
A company eligible for the reduced corporate tax rate — typically a smaller company with passive income below the prescribed threshold.
Capital gains tax (CGT)
Tax on the capital gain made from the disposal of a CGT asset, included in assessable income in the year of the CGT event.
CGT event
An event that triggers a CGT calculation, most commonly CGT event A1 — the disposal of a CGT asset.
Commissioner of Taxation
The statutory office responsible for administering the taxation laws, at the head of the ATO.
Consolidated group
A group of wholly-owned Australian resident companies that elect to be treated as a single entity for income tax purposes.
Cost base
The amount used to calculate a capital gain or loss — generally the acquisition cost plus incidental costs and capital improvements.
Debt forgiveness
The release of a debt by a creditor, which may give rise to income or capital gains consequences for the debtor under the commercial debt forgiveness rules.
Division 7A
Provisions that treat certain loans, payments, and debt forgiveness by a private company to its shareholders (or associates) as dividends.
Effective life
The period a depreciating asset is expected to be used for income-producing purposes, used to calculate decline in value.
Franked distribution
A dividend paid by a company out of profits on which Australian corporate tax has been paid, carrying a franking credit to the recipient.
Franking credit
A credit attached to a franked dividend representing corporate tax already paid, which the shareholder can claim against their tax liability.
Fringe benefits tax (FBT)
A tax on non-cash benefits provided by an employer to an employee, paid by the employer at the highest marginal tax rate plus Medicare levy.
General anti-avoidance rule
The general rule in Part IVA that allows the Commissioner to cancel a tax benefit obtained through a scheme entered into for the dominant purpose of obtaining that benefit.
GST
Goods and Services Tax — a 10% tax on most supplies of goods, services, and property in Australia.
Imputation
The system under which resident shareholders are credited with the corporate tax paid by an Australian company on profits distributed as dividends.
Income tax return
The annual return lodged by a taxpayer with the ATO disclosing assessable income, deductions, and tax payable.
Input tax credit
A credit for GST included in the price of acquisitions made for a creditable purpose.
Main residence exemption
The CGT exemption that generally disregards a capital gain or loss on the sale of a dwelling used as the taxpayer's main residence.
Margin scheme
A method for calculating GST on eligible property supplies based on the margin between the sale price and the acquisition cost.
Non-commercial losses
Losses from a business activity that a non-company taxpayer cannot deduct against other income unless certain tests are met.
Objection
A formal written challenge to an assessment or reviewable decision lodged with the Commissioner within the objection period.
Ordinary income
Income according to ordinary concepts — typically salary, wages, business profits, and rent.
Part IVA
The general anti-avoidance provisions of the 1936 Act that target schemes entered into for the dominant purpose of obtaining a tax benefit.
Private ruling
A binding ruling issued by the Commissioner on how a tax law applies to a specific taxpayer's circumstances.
Residency
An individual's status as a resident or non-resident of Australia for tax purposes, determining their tax treatment.
Small business CGT concessions
Four concessions available to eligible small business taxpayers that reduce capital gains on the sale of active assets.
Superannuation guarantee
The minimum percentage of ordinary time earnings an employer must contribute to a complying super fund for each eligible employee.
Tax agent
A person registered with the Tax Practitioners Board and authorised to provide tax agent services for a fee.
Tax benefit
An amount not included in assessable income, an allowable deduction, or a reduction in withholding tax that the taxpayer has obtained in connection with a scheme.
Tax file number (TFN)
A unique identifier issued by the ATO to individuals and entities for tax administration purposes.
Taxable income
Assessable income less allowable deductions. The amount on which income tax is assessed.
Taxable supply
A supply made for consideration, in the course of an enterprise, connected with the indirect tax zone, and by a registered entity.
Temporary full expensing
A former provision allowing eligible businesses to immediately deduct the cost of eligible depreciating assets. Ended 30 June 2023.
Thin capitalisation
Rules that limit interest deductions for multinational entities whose Australian operations are excessively debt-funded.
Withholding tax
Tax withheld at source from certain payments — including interest, dividends, royalties, and payments to foreign residents.
Working from home deduction
A deduction for additional expenses incurred by an employee working from home, available via the actual cost method or a fixed rate method published by the Commissioner.
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