CPA Australia Taxation key terms

The total of ordinary income and statutory income derived by a taxpayer during an income year, excluding amounts that legislation specifically makes non-assessable or exempt.

Income according to everyday concepts and judicial precedent, typically characterised by recurrence, periodicity and a nexus to a productive source such as employment, business or property.

Amounts that legislation declares to be assessable income even though they may not satisfy ordinary income concepts, such as net capital gains, allowances and certain recoupments.

Income that is assessable in principle but which a provision of the tax law declares not assessable; it is disregarded and generally does not affect other calculations.

Amounts excluded from assessable income by a specific provision, which unlike exempt income can still affect the calculation of losses and other entitlements.

Losses and outgoings deductible to the extent they are incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for that purpose.

Deductions allowed by particular provisions rather than the general deduction rule, for example decline in value of depreciating assets, repairs and gifts to deductible gift recipients.

The annual depreciation deduction claimed for a depreciating asset, calculated under the diminishing value or prime cost method using an effective life set by the taxpayer or the Commissioner.

The estimated period a depreciating asset can be used by any entity for a taxable purpose, expressed in years and used to work out the rate of decline in value.

A deduction spread over a statutory period for the construction cost of buildings, structural improvements and certain earthworks used to produce assessable income.

The excess of capital proceeds from a CGT event over the cost base of the CGT asset, included in assessable income only after applying any available CGT concessions.

The amount used to measure a capital gain, comprising acquisition costs, incidental costs, non-capital holding costs, capital expenditure and certain preserved costs.

A defined transaction or circumstance, such as disposal of an asset, that triggers the capital gains tax rules and requires a gain or loss to be calculated.

A capital gain made by an individual, complying super fund or trust on an asset held at least twelve months, which is reduced by the relevant percentage before inclusion in income.

The amount included in assessable income or allowed as a deduction when a depreciating asset is disposed of, lost or destroyed and its termination value differs from its adjustable value.

Anything produced, manufactured or acquired that is held for sale or exchange in the ordinary course of business, with changes in value generally taken into account annually.

A shortfall arising when allowable deductions exceed assessable income in an income year, which may generally be carried forward and deducted in later years subject to tests.

A situation where deductions attributable to an income-producing investment exceed the income it generates, producing a loss that may reduce tax on other income.

Anything produced, manufactured or acquired that is held for sale or exchange in the ordinary course of business, with changes in value generally taken into account annually.

A person's status as an Australian resident for tax purposes, determined by ordinary concepts, domicile, the 183-day test or Commonwealth superannuation scheme membership.

A taxpayer who is not an Australian resident for tax purposes, generally taxed only on Australian-sourced income and ineligible for the tax-free threshold.

The amount of income an individual Australian resident may receive before tax becomes payable, effectively applying a zero rate to the first band of taxable income.

The rate applying to the last dollar of an individual's taxable income, which determines the tax effect of an additional deduction or extra income.

A levy imposed on taxable income of individuals at a set percentage, with surcharge and reduction rules depending on income and private hospital cover.

A credit that directly reduces the tax payable after applying rates, rather than reducing taxable income, and which may or may not be refundable.

The credit attached to a franked dividend representing company tax already paid, which resident shareholders include in income and claim as an offset.

The mechanism that allocates company tax to shareholders through franking credits, preventing double taxation of distributed company profits.

A distribution of company profits to a shareholder, including certain disguised or deemed distributions, which is generally assessable income of the recipient.

A tax payable by employers on the value of non-cash benefits provided to employees or associates in respect of employment, calculated using grossing-up rates.

A benefit provided to an employee or their associate by an employer or associate in respect of employment, excluding salary and certain statutory exclusions.

A broad-based indirect tax of a set percentage on taxable supplies and taxable importations, with registered entities generally crediting tax paid on business inputs.

The credit a registered entity claims for GST included in the price of acquisitions or importations used in carrying on its enterprise.

A supply made for consideration in the course or furtherance of an enterprise, connected with Australia, by a registered entity, excluding supplies that are GST-free or input taxed.

Tax collected at source on certain payments such as interest, dividends and royalties paid to foreign residents, or on salary under the pay-as-you-go system.

The system requiring periodic withholding or instalment payments of tax during the year, with a final reconciliation in the annual return.

A relationship of persons carrying on business in common with a view to profit, which is not itself a taxable entity; partners are taxed on their individual share of net income.

An arrangement where a trustee holds property for beneficiaries; the trustee is generally assessed on trust income, subject to present entitlement and streaming rules.

Arrangements entered into with the dominant purpose of obtaining a tax benefit that would not otherwise arise, which general anti-avoidance provisions may cancel.

Deliberately concealing or misrepresenting income or entitlements to reduce tax liability, which attracts criminal and administrative penalties rather than adjustment only.

The statutory obligation to retain documents supporting income, deductions and tax calculations for a set period, generally five years after the relevant return is lodged.