What these tax buzzwords really mean
UNLESS you happen to be an accountant by trade, chances are you find tax time more than a little confusing.
But as the 2018 tax deadline looms, accounting software company Xero's head of industry Matthew Prouse has decoded some of the most common - and baffling - tax buzzwords.
He said for many people, tax time lingo "makes every word seem like a foreign language" - but that your accountant was there to help.
"As a qualified expert, your accountant is on hand to work out how to best represent your tax position, make assessments and calculations, and explain them back to you," Mr Prouse said.
"It's okay to ask them to explain the terminology too and, if you still don't understand, ask again."
Here's what some of the trickiest tax buzzwords really mean:
An allowable deduction is an expense that you can subtract from your income to reduce the amount you'll be taxed on. In order to qualify, the cost usually directly relates to earning your income - for example, money spent on a work uniform.
Similar to depreciation, amortisation refers to the process of estimating the declining value of an intangible asset - such as a patent or loan that you can't physically touch - over a period of time.
A beneficiary is a person (or organisation) who is eligible to receive benefits, such as money, from a trust, will or life insurance policy.
BUSINESS ACTIVITY STATEMENT (BAS)
This form helps business owners report and pay their goods and services tax (GST), pay as you go (PAYG) instalments, PAYG withholding tax, and other taxes.
Capital allowances provide tax relief on certain long-lasting assets, such as property or equipment. Capital allowances are the tax rules that let you claim deductions on these expenditures.
Capital gains are the profits made from the sale of property or an investment, such as shares. Capital gains tax (CGT) refers to the tax that is applied to that profit.
If you are a member of a superannuation fund, a contribution cap is there to limit the amount of money that can be contributed into your account at concessional tax rates each financial year.
The value of a fixed asset can reduce over time, particularly due to wear and tear. This loss of value is measured as depreciation. You can expect to lose some value on a business vehicle, for example, simply by using it over time.
This refers to the payment of any source of investment or trading income. For example, if a trust allocates income and/or capital gains to a beneficiary, the payment is called a distribution.
A sum of money paid by a company to its shareholders, either in cash, or by providing extra shares in the company.
DIVIDEND IMPUTATION CREDIT
Dividend imputation (also known as franking credits) is a system that allows some or all of the tax paid by a company to be passed on to its shareholders in the form of a tax credit known as an imputation credit. Shareholders can then use this credit to offset any tax due on a dividend that they receive.
A fixed asset is a tangible item expected to be used over a long period, that is required in order to produce income and is not likely to be consumed or sold as part of normal business activities, such as land, buildings, vehicles and equipment.
INSTANT ASSET WRITE-OFF
The instant asset write-off is a tax break for small businesses. If you're a business with a turnover less than $10 million, and you bought an asset that costs less than $20,000 in the 2016-17 tax year, you may be eligible to deduct the business portion of this expense in your tax return of the same year.
PAY AS YOU GO (PAYG) INSTALMENTS
This is a system that individuals and businesses use to make regular payments towards their expected annual income tax throughout the financial year.
This is the system used to withhold income tax from employees throughout the year, designed to help payees meet their end-of-year tax liabilities.
SUPER INCOME STREAM
A super income stream is a way of receiving a regular income from the money you've built up in your superannuation fund. Other options may be to withdraw your super as a lump sum, or a combination of both.
TAXABLE PAYMENTS ANNUAL REPORT (TPAR)
If you work in certain industries - such as cleaning, taxi driving, road freight, building and construction, government and, from next year, security, IT and couriering - you may need to lodge a taxable payments annual report each year. The report asks you to detail the payments you've made to contractors - including subcontractors, consultants and independent contractors - to help the ATO identify those who haven't met their tax obligations.