Key Business & Tax Terms You Definitely Should Know

These are some of the key business and tax terms you definitely should know…

Having a business accountant means it’s their job to deal with all the technical jargon, not yours! But it’s always beneficial to have an idea of the key tax terms being thrown around. This way you can communicate better with your accountant and better understand the processes in place.

APRA – Australian Prudential Regulatory Authority

The Australian Prudential Regulation Authority (APRA) is a statutory authority of the Australian Government and the prudential regulator of the Australian financial services industry. 

PAYGW – Pay As You Go Tax Withholding

Employers collect pay as you go (PAYG) withholding amounts from payments made to employees and contractors, to help payees meet their end-of-year tax liabilities.

PAYGI – Pay As You Go Income Tax Instalments

Pay as you go (PAYG) instalments is a system for making regular payments towards your expected annual income tax liability. It only applies to you if you earn business and/or investment income over a certain amount.

IAS – Instalment Activity Statement

Taxpayers who aren’t registered for GST use an Instalment Activity Statement (IAS) to report. Entities that lodge a quarterly BAS but must pay PAYG withholding monthly, as medium withholders (over $25,000 PAYGW per year), also use the IAS.

WorkCover

WorkCover (or workers’ compensation) is a compulsory insurance for employers who engage employees and common law employees.

RCTI – Recipient Created Tax Invoices

An RCTI is an invoice issued by the recipient of the supply ‘on behalf’ of the supplier.

Appointor

The Appointor is the person or persons with the power to remove and appoint the Trustee of a trust. It is common for the Appointor of a discretionary family trust to be one or both parents.

Trustee

A natural or legal person that holds property to manage it for the benefit of a beneficiary, such as an individual or a charitable organisation.

Binding Death Nomination (BDN)

Binding death benefit nomination is a legally binding nomination that allows you to advise the trustee of your superannuation fund who is to receive your superannuation benefit in the event of your death.

Executor

A person or institution appointed by a testator to carry out the terms of their will.

Franking Account

A franking account records the amount of tax paid that a franking entity can pass on to its members as a franking credit via dividend.

SMSF – Self Managed Super Fund

A Self-Managed Super Fund (SMSF) is a superannuation trust structure that provides financial remuneration to its members in retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund. SMSF’s can also provide greater investment choices for members such as investing in direct property.

Concessional Contribution

You make concessional contributions into your superannuation fund, and the fund includes them in its assessable income. Your fund then taxes these contributions at a concessional rate of 15%, known as ‘contributions tax’.

Non-Concessional Contribution

Non-concessional contributions are contributions made into your superannuation fund. These do not include the funds assessable income. The most common type is personal contributions made by the member when they claim no income tax deduction.

Division 293 Tax

This tax reduces the tax concession on superannuation concessional contributions for individuals with income greater than $250,000 a year. Division 293 tax will charge at 15%.

Now that you know the lingo, contact us to talk about your tax and business needs! (We’ll still keep the jargon to a minimum!)

The ATO also has a glossary of business, super and tax terms.