Australian Tax Glossary

Total income that's subject to Australian tax before deductions are applied. Includes salary, wages, business income, interest, dividends, rental income, and capital gains. Some income (e.g. some scholarships, certain government allowances) is exempt and not included.

Assessable income minus allowable deductions. This is the figure your tax is calculated on using the marginal tax brackets. For FY2025-26 Australian residents, the first $18,200 of taxable income is tax-free.

The system Australian employers use to withhold tax from each pay cycle and remit it to the ATO on your behalf. The amount withheld is based on estimated annual earnings, so if you start work mid-year you'll typically have over-withholding and receive a refund at tax time.

Annual statement from each employer showing your gross wages and PAYG withheld for the financial year. Now reported automatically via Single Touch Payroll (STP) and pre-filled into myTax — usually finalised by mid-July.

The first $18,200 of taxable income on which Australian tax residents pay zero income tax. You can only claim this with one employer at a time — usually your highest-paying job. Non-residents and working holiday visa holders don't get this threshold.

The tax rate applied to your next dollar of income. Australian tax brackets are progressive: only the income above each threshold is taxed at that bracket's rate. FY2025-26 brackets for residents: 0% / 16% / 30% / 37% / 45% (revised Stage 3 cuts applied — Albanese 2024 modification of the original 2018 Morrison plan).

Tax cuts that took effect 1 July 2024 (FY2024-25 onwards). Lowered the 19% bracket to 16%, raised the 32.5% bracket threshold from $45k to $135k and reduced its rate to 30%, and adjusted the top brackets. Applied automatically to all FY2025-26 returns.

Tax residency determines your rates and threshold — independent of visa status or immigration residency. The simplest test (183-day rule): if you spent 183+ days in Australia during the financial year and behave like you're settling, you're likely a resident. Most international students with 6+ months in AU qualify.

Costs you paid yourself that directly relate to earning your income. Three ATO tests must all pass: (1) you paid it (not reimbursed), (2) it directly relates to your job, (3) you have a record. Common categories include uniforms, tools, professional fees, self-education, and home office expenses.

ATO's simplified method for claiming working-from-home expenses in FY2025-26: 70 cents for every hour you actually work from home. Covers electricity, gas, internet, phone, stationery, and depreciation of small office equipment — you can't claim those separately if using this method. Need a diary or log of hours.

Simplified method for vehicle expense claims: 88 cents per kilometre for work-related travel, capped at 5,000km per year (max claim $4,400 in FY2025-26). No receipts required, but you must keep a reasonable record (diary or app) showing the work purpose of each trip. Commuting from home to a regular workplace doesn't count.

Alternative vehicle expense method that can yield higher claims. Requires a 12-week continuous logbook recording all trips (work + private), plus all year-round receipts for fuel, servicing, registration, insurance, and loan interest. Calculate work-use percentage from the logbook, apply to total costs.

Work-related items costing $300 or less are immediately deductible in full in the year purchased. Items above $300 must be depreciated over their effective life — for example, a $1,500 laptop with a 3-year life is claimed as $500/year for 3 years.

The way you claim work-use of expensive assets ($300+) over their useful life. ATO publishes effective lives by asset type: computers 3 years, office furniture 10 years, etc. You claim a portion each year, multiplied by your work-use percentage. Use ATO's Depreciation Calculator for precise figures.

Course fees, textbooks, stationery, and travel for education that directly relates to your CURRENT income-earning role — not a new career. The $250 first-dollar reduction was removed from FY2022-23 onwards, so claim from the first dollar. International student tuition for the degree itself is NOT deductible.

A 2% levy on taxable income that funds Australia's public health system. Phased in for low-income earners (~$28,011–$35k), full rate above. Some temporary visa holders (most international students from non-agreement countries) qualify for an exemption — saves $500–$1,500 per year.

An ADDITIONAL 1%–1.5% surcharge for taxpayers above $101,000 single income (raised from $97,000 from 1 July 2025) who don't have private hospital cover. FY2025-26 single tiers: $101k-$118k = 1.0%, $118k-$158k = 1.25%, $158k+ = 1.5%. Family thresholds = singles × 2 = $202,000 base. OSHC (Overseas Student Health Cover) does NOT count as private hospital cover for MLS purposes — many international students mistakenly think it does.

Document from Services Australia confirming you're not entitled to Medicare for a given period — required to claim a Medicare Levy exemption. Apply via servicesaustralia.gov.au; takes 4–6 weeks to arrive by post. Keep with your tax records.

Australian government student loans, repaid through the tax system. From FY2025-26 onwards (Universities Accord Act 2025) the new marginal system applies: nil below $67,000, then 15c on every dollar above $67,000, $8,700 + 17c above $125,000, and a flat 10% on total income above $179,285. Replaces the old 18-band flat-on-total schedule that started at $54,435 @ 1%. Calculated separately from your tax refund on repayment income (gross income before deductions).

A direct reduction of your tax payable (vs deductions which reduce taxable income). Common offsets: LITO (low income), Spouse Tax Offset, Senior Australians and Pensioners Tax Offset (SAPTO). Offsets typically can't reduce tax below zero — they don't refund as cash unless specifically refundable.

Up to $700 reduction in tax for low income earners. Full $700 if taxable income ≤ $37,500; phases out from $37,501–$66,667. Applied automatically by myTax. Combined with the tax-free threshold, people earning under ~$22,500 typically pay zero income tax.

Tax credits attached to dividends paid by Australian companies that have already paid corporate tax. When you receive franked dividends, you also get a franking credit you can use to offset your personal tax. Low-income shareholders may even receive a refund of unused franking credits.

Tax on the profit from selling assets like shares, investment property, or cryptocurrency. Calculated as sale price minus cost base (purchase price + expenses). Added to your assessable income for the year and taxed at your marginal rate. Australian tax residents get a 50% discount if the asset was held >12 months.

Australian tax residents who hold an asset for 12 months or more before selling pay tax on only 50% of the capital gain. Example: $20,000 gain on shares held 18 months = only $10,000 added to taxable income. Doesn't apply to companies (which pay full CGT).

When the costs of holding an investment (loan interest, rates, repairs, depreciation) exceed the income it generates (e.g. rent). The net loss can offset other taxable income, lowering your tax. Common with Australian investment property strategies.

Franked dividends come with franking credits (the company already paid corporate tax). Unfranked dividends don't — usually from companies that earned profit overseas or paid no Australian corporate tax. Both are taxable income, but franked dividends bring a tax offset.

Your unique 9-digit personal identifier with the ATO. Free, lifetime, never changes (even with visa changes or citizenship). Required for employment and tax lodgement. Without one, employers withhold tax at the highest marginal rate (~47%). Treat as confidential — never share via email, phone, or social media.

11-digit identifier for businesses (including sole traders and freelancers). Different from a TFN. Required if you're invoicing clients as a contractor. Free to apply via the ABR website. If turnover ≥ $75,000/year, you must also register for GST.

ATO's official confirmation of your tax outcome after lodgement, usually issued within 2 weeks. Shows final taxable income, tax owed, HECS repayment, refund or amount payable, and the date everything was processed. Keep it — used as proof of income for home loans, visa applications, and tax amendments.

Process to correct errors in a lodged tax return — missed income, forgotten deductions, wrong figures. Done through myTax within 2 years of your NoA date (4 years for some items). Self-amendments rarely attract penalties; you'll only be charged interest (GIC) if additional tax is owed.

Formal written process to dispute an ATO decision (assessment, audit, deduction denial). Used when the standard amendment window has closed or when you disagree with the ATO's interpretation. ATO has 60 days to respond. Complex — consider engaging a registered tax agent.

ATO requires you to keep all tax-relevant records for 5 years from the date you lodged. FY2025-26 records → keep until 31 October 2031. Acceptable formats: paper receipts, digital photos/scans, bank statements, logbooks. Even if you've left Australia, you must keep the records.