Australian Tax Glossary
Definitions of key Australian payroll and tax terms including PAYG, superannuation, Medicare levy, HECS-HELP, FBT and tax offsets. Understand your payslip.
By Mottalib Radif, MBA · Updated June 2026 Quick Term Finder
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This glossary is a comprehensive reference covering the most important payroll, tax, and superannuation terms used in Australia. Whether you are reading your first pay slip, comparing job offers, lodging your tax return, or planning your retirement contributions, these definitions explain the key concepts and calculations that determine how much you earn, how much you keep, and how much goes to tax, super, and other obligations.
Each definition includes the context you need to understand not just what the term means but why it matters to your financial situation. Where relevant, we have linked to the specific calculator or guide on this site that covers the topic in more detail.
A
- ABN (Australian Business Number)
- A unique 11-digit identifier issued by the Australian Business Register to every business, sole trader, partnership, trust, and company operating in Australia. Contractors and freelancers use their ABN when invoicing clients, and the ABN allows clients to verify that the entity is registered for GST and other obligations. If a worker providing services does not quote an ABN on their invoice, the payer is legally required to withhold 47% of the payment (the top marginal rate plus Medicare levy) under the "no ABN withholding" rules and remit it to the ATO. This rule prevents people from operating in the cash economy without being registered with the tax system.
- ATO (Australian Taxation Office)
- The principal revenue collection agency of the Australian Government, responsible for administering income tax, goods and services tax (GST), superannuation, excise duties, and other federal tax obligations. The ATO publishes the tax tables, thresholds, and rates used to calculate PAYG withholding and individual tax liabilities each financial year. It also administers the HECS/HELP repayment system, the Super Guarantee compliance program, and the ABN and TFN registration systems. The ATO processes over 14 million individual tax returns each year and collects more than $500 billion in annual revenue.
- Assessable Income
- The total income you must report on your tax return before any deductions are applied. Assessable income includes salary and wages, interest earned on savings accounts and term deposits, dividends from shares (including franking credits), rental income from investment properties, net capital gains from selling assets, business income, government payments (such as JobSeeker or parental leave pay), and foreign income. After subtracting allowable deductions from assessable income, you arrive at your taxable income, which is the figure used to calculate your tax liability.
B
- Bonus Tax
- When an employer pays a bonus, commission, or back payment, the ATO requires it to be taxed using specific withholding methods. Schedule 5 (lump sum payments in arrears) or Method B (for bonuses paid with a regular pay cycle) typically results in higher withholding than your usual marginal rate because the withholding calculation assumes the bonus represents your regular pay level for the full year. The additional withholding is temporary; your actual tax liability on the bonus is reconciled when you lodge your annual tax return, and any excess withholding is refunded. Use our bonus calculator to estimate the net amount of a bonus after tax.
C
- Concessional Contributions
- Before-tax contributions to your superannuation fund, including employer Super Guarantee (SG) contributions, salary sacrifice amounts, and personal deductible contributions. Concessional contributions are taxed at a flat 15% inside the super fund rather than at your marginal tax rate, which creates a tax saving for anyone whose marginal rate exceeds 15% (that is, anyone earning above the tax-free threshold). The concessional contributions cap for 2025-26 is $30 000 per financial year. Exceeding this cap triggers additional tax at your marginal rate on the excess amount, plus an interest charge. High-income earners whose income plus concessional contributions exceeds $250 000 pay an additional 15% Division 293 tax, bringing the total super tax to 30%.
D
- Division 293 Tax
- An additional 15% tax on concessional super contributions for high-income earners. Division 293 applies when the sum of your income and low-tax concessional contributions exceeds $250 000 in a financial year. The extra 15% brings the total tax on those contributions to 30%, which is closer to the marginal tax rates of the highest earners (37% and 45%). The ATO issues a Division 293 assessment after you lodge your annual tax return, and you can choose to pay the assessment from your bank account or have it deducted from your super balance.
E
- Effective Tax Rate
- The average rate at which your total income is taxed, calculated by dividing total tax paid (including income tax, LITO, and Medicare levy) by total gross income. Because Australia uses a progressive tax system with multiple brackets, your effective tax rate is always lower than your marginal tax rate. For example, a worker earning $100 000 has a marginal rate of 30% but an effective rate of approximately 22% (including Medicare levy). The effective rate gives a more accurate picture of your overall tax burden and is the better figure to use when budgeting your after-tax income.
F
- FBT (Fringe Benefits Tax)
- A tax paid by employers on certain non-cash benefits provided to employees and their associates, such as company cars for personal use, car parking at or near the workplace, entertainment expenses, expense reimbursements for private matters, and housing assistance. The FBT rate for 2025-26 is 47%, matching the top marginal tax rate plus Medicare levy. Employees generally do not pay FBT directly; however, reportable fringe benefits exceeding $2 000 must be disclosed on the employee's income statement and may affect income tests for government benefits, Medicare Levy Surcharge, HELP repayments, and child support obligations.
- FHSSS (First Home Super Saver Scheme)
- A government scheme that allows eligible first home buyers to withdraw voluntary super contributions (up to $15 000 per financial year and $50 000 in total) plus associated deemed earnings to use toward a first home deposit. Only voluntary contributions made from 1 July 2017 onwards are eligible; compulsory employer SG contributions cannot be withdrawn. Contributions made via salary sacrifice are taxed at 15% going in (instead of your marginal rate), and withdrawals are taxed at your marginal rate minus a 30% offset. The scheme is designed to help first home buyers save faster by taking advantage of the concessional tax treatment of superannuation.
G
- Gross Pay
- The total amount of compensation earned before any deductions or taxes are taken out. Gross pay includes base salary, overtime payments, allowances (such as shift allowances, travel allowances, and uniform allowances), bonuses, commissions, and other taxable payments. It is the starting point for calculating PAYG withholding, Medicare levy, HECS/HELP repayments, and arriving at your net pay (take-home pay). When a job offer quotes a salary figure, it is almost always the gross annual amount unless otherwise specified.
H
- HECS-HELP (Higher Education Contribution Scheme)
- The Australian Government's income-contingent loan scheme that allows eligible domestic students to defer their university tuition fees. Introduced in 1989, HECS enables students to study without upfront costs and repay their debt through the tax system once their repayment income exceeds the minimum threshold ($54 435 for 2025-26). Repayment rates are progressive, starting at 1% and increasing to a maximum of 10% for incomes above $159 664. The debt is indexed annually at the lower of CPI or WPI (following 2024 reforms). Use our HECS calculator to estimate your repayments.
I
- Income Protection Insurance
- An insurance policy that replaces a portion of your income (typically 75% of your pre-disability earnings) if you are unable to work due to illness or injury. Benefit periods range from two years to age 65, with waiting periods of 30 to 90 days before payments begin. Premiums paid for income protection insurance outside of super are generally tax-deductible at your marginal rate. Many super funds include a default level of income protection cover, though the benefit periods and definitions of disability may be less generous than standalone policies purchased through an insurance adviser.
L
- LITO (Low Income Tax Offset)
- A non-refundable tax offset that reduces the amount of income tax payable for individuals earning below certain income thresholds. For 2025-26, the maximum LITO is $700 for taxable incomes up to $37 500. The offset phases out at a rate of 5 cents per dollar between $37 500 and $45 000 (reducing to $325) and then at 1.5 cents per dollar between $45 000 and $66 667 (reducing to zero). LITO is automatically applied when you lodge your annual return and cannot create a tax refund on its own because it is non-refundable. It effectively raises the tax-free threshold from $18 200 to approximately $22 575 for eligible workers.
- LMITO (Low and Middle Income Tax Offset)
- A temporary non-refundable tax offset that was available to low and middle-income earners from 2018-19 through 2021-22. LMITO provided up to $1 500 in additional tax relief for the final year (2021-22). The offset was discontinued from 1 July 2022 and is no longer available. Its benefits have been partially replaced by the reduction in the 19% tax rate to 16% under the revised Stage 3 tax cuts that took effect on 1 July 2024.
M
- Marginal Tax Rate
- The tax rate applied to the last dollar of your taxable income within Australia's progressive tax system. Only the income within each bracket is taxed at that bracket's rate, so your marginal rate only applies to income above the relevant threshold, not to your entire income. For 2025-26, rates are 0% up to $18 200, 16% from $18 201 to $45 000, 30% from $45 001 to $135 000, 37% from $135 001 to $190 000, and 45% above $190 000. Your marginal rate is the key figure for evaluating the after-tax value of additional income, such as overtime, bonuses, or investment returns. See our tax brackets guide.
- Medicare Levy
- A 2% levy on taxable income that helps fund Australia's universal public healthcare system, Medicare. The levy is calculated on your total taxable income with no bracket structure: at $80 000, you pay $1 600; at $150 000, you pay $3 000. Low-income earners may qualify for a reduction (the "shade-in") or full exemption if their taxable income falls below $26 000 (singles). Non-residents for tax purposes are exempt from the Medicare levy but cannot access Medicare services. The levy is collected through the PAYG system alongside income tax. Use our Medicare levy calculator for exact figures.
- Medicare Levy Surcharge (MLS)
- An additional levy of 1%, 1.25%, or 1.5% on taxable income for higher-income earners who do not hold an appropriate level of private hospital insurance. For singles, the MLS applies when income exceeds $93 000; for families, the threshold is $186 000 (increasing by $1 500 per dependent child after the first). The surcharge is designed to encourage higher-income Australians to use the private hospital system rather than relying entirely on Medicare. Holding a complying private hospital policy (not just extras cover) for the full year exempts you from the MLS. For many earners above $110 000, a basic hospital policy costs less than the MLS, making insurance financially worthwhile.
N
- Net Pay (Take-Home Pay)
- The amount of money actually deposited into your bank account each pay period after all taxes, levies, and deductions have been subtracted from your gross pay. Net pay is calculated by taking gross pay and subtracting income tax (PAYG withholding), the Medicare levy, any HECS/HELP compulsory repayments, union fees, salary sacrifice amounts, and other voluntary deductions. For a worker earning $85 000 gross, the approximate net pay is $67 000 per year (without HECS) or $64 500 (with HECS). Use our pay calculator to estimate your net pay based on current ATO rates.
- Net-to-Gross Calculator
- A reverse tax calculator that works backwards from a desired net (take-home) amount to determine the gross salary needed to achieve it after accounting for income tax, Medicare levy, and other deductions. This tool is particularly useful when negotiating a salary in terms of what you want to take home, when a contractor needs to quote a gross rate that delivers a specific after-tax income, or when relocating from one country to another and wanting to maintain the same net pay. Try our net-to-gross calculator.
- Non-Concessional Contributions
- After-tax contributions to your superannuation fund. These contributions are not taxed when they enter the fund because you have already paid income tax on the money. The non-concessional cap for 2025-26 is $120 000 per year. If you are under 75, you can use the "bring-forward" rule to contribute up to $360 000 over three years. Non-concessional contributions are useful for building super balances quickly (for example, from an inheritance or property sale proceeds) and can be withdrawn tax-free at retirement. Exceeding the cap attracts a penalty: excess contributions are taxed at 47% or can be withdrawn with associated earnings taxed at your marginal rate.
- Novated Lease
- A salary packaging arrangement involving a three-way agreement between you, your employer, and a leasing company. Your employer makes car lease payments and running costs (fuel, insurance, registration, maintenance) from a combination of your pre-tax and post-tax salary. This reduces your taxable income and provides GST savings on the vehicle purchase price. Since July 2022, electric vehicles below the luxury car tax threshold ($91 387 for fuel-efficient vehicles in 2025-26) are FBT-exempt, making novated leases for EVs exceptionally tax-effective. At lease end, you can buy the car by paying the residual value, refinance into a new lease, or return the vehicle.
O
- Ordinary Time Earnings (OTE)
- The earnings that form the base for calculating employer Super Guarantee contributions. OTE includes base salary, commissions, shift loadings, annual leave loading, and some allowances that are part of the employee's normal remuneration. OTE generally excludes overtime payments, reimbursements of expenses, workers' compensation payments, and certain lump sum termination payments. The ATO provides detailed rulings (SGR 2009/2) on what constitutes OTE. For most standard full-time employees, OTE equals their base salary plus any regular allowances or loadings.
P
- Pay Period
- The recurring schedule on which employees are paid. The three most common pay periods in Australia are weekly (52 pay periods per year), fortnightly (26 pay periods), and monthly (12 pay periods). The pay period affects how PAYG withholding is calculated: the ATO publishes separate tax tables for weekly, fortnightly, and monthly pay periods to ensure the correct amount is withheld throughout the year. Fortnightly is the most common pay cycle in Australia, used by approximately 45% of employers. Monthly pay is more common in corporate and professional services roles, while weekly pay is typical in hospitality, retail, and construction.
- PAYG (Pay As You Go) Withholding
- The system under which employers withhold income tax from employee wages and remit it to the ATO progressively throughout the year, rather than requiring employees to pay their entire tax bill in a lump sum at year-end. The amount withheld from each pay is calculated using ATO tax tables (also known as "Schedule 1" for regular payments), which account for the employee's gross pay amount, pay frequency, whether they have claimed the tax-free threshold, and whether they have declared a HECS/HELP debt. At the end of the financial year, total withholdings are reconciled against the employee's actual tax liability when they lodge their return. Over-withholding results in a tax refund; under-withholding results in a tax bill.
- Private Health Insurance Rebate
- A government rebate that reduces the cost of private health insurance premiums for eligible Australians. The rebate is income-tested and age-based: for individuals under 65 earning less than $93 000 (singles) or $186 000 (families), the base rebate is 24.608%. The rebate increases for those aged 65 to 69 (28.710%) and 70+ (32.812%), reflecting the higher cost of insurance for older Australians. The rebate can be received as a premium reduction (applied directly to your insurance bill) or claimed as a tax offset when you lodge your return. Above the base tier income thresholds, the rebate decreases in tiers and is not available at all for singles earning above $144 000 or families above $288 000.
S
- Salary Packaging (Salary Sacrifice)
- An arrangement where you agree to receive part of your pre-tax remuneration in a form other than cash salary, such as additional super contributions, a novated car lease, or other approved benefits. Salary sacrifice into super is taxed at 15% inside the fund instead of your marginal rate, providing significant tax savings for anyone on a marginal rate above 15%. For employees of not-for-profit organisations, up to $15 900 in general living expenses can be salary packaged FBT-free, plus $2 650 in meal entertainment. See our salary packaging guide for details on how packaging works and whether it is worthwhile for your situation.
- Salary to Hourly
- The conversion of an annual salary figure to an equivalent hourly rate, typically used for comparing different pay structures, evaluating overtime value, or assessing contractor rates. In Australia, the standard full-time working year is 52.18 weeks at 38 hours per week, totalling 1 982.84 hours (or approximately 1 976 hours using 52 weeks). To convert, divide the annual salary by total working hours. An $80 000 salary equals approximately $40.49 per hour. Use our salary to hourly calculator to convert between pay frequencies accurately, including after-tax hourly rates.
- SGC (Super Guarantee Charge)
- A charge imposed by the ATO on employers who fail to pay the minimum Super Guarantee contributions on time. The SGC includes three components: the unpaid super amount (calculated on total salary and wages, not just OTE), interest charges at 10% per annum from the start of the quarter, and a $20 per-employee per-quarter administration fee. Critically, the SGC is not tax-deductible for the employer, unlike regular SG contributions which are deductible. This punitive treatment creates a strong financial incentive for employers to comply with their super obligations and pay on time.
- STSL (Study and Training Support Loan)
- The umbrella term used by the ATO for all government education loans, including HECS-HELP, FEE-HELP, VET Student Loans, SA-HELP, and OS-HELP. All STSL debts follow the same compulsory repayment thresholds and are administered through the tax system. When you start a new job, you must declare any STSL debt on your Tax File Number Declaration, which instructs your employer to withhold additional amounts on top of regular income tax. The term "STSL" appears on your payment summary and ATO notices, while "HECS" remains the commonly used colloquial term.
- Super (Superannuation)
- Australia's compulsory retirement savings system, established in its current form in 1992 under the Keating government's Superannuation Guarantee scheme. Employers must contribute a percentage of each employee's Ordinary Time Earnings (12% for 2025-26) into a complying super fund. These contributions, combined with investment returns compounding over decades, build a retirement balance that can be accessed from preservation age (60 for those born after 30 June 1964). Total super assets in Australia exceed $3.9 trillion, making it one of the largest pension pools globally. Learn more in our super guide.
- Super Guarantee (SG)
- The minimum percentage of an employee's Ordinary Time Earnings (OTE) that an employer must contribute to the employee's nominated super fund. The SG rate for 2025-26 is 12%, which is the final rate in the legislated series of annual increases from 9.5% (2014-2021). On a $100 000 salary, the employer must contribute at least $12 000 to your super fund per year, paid quarterly by the 28th day after each quarter ends. All employees receive SG regardless of earnings level (the $450 per month minimum threshold was removed in July 2022). Use our super calculator to see your SG amounts.
T
- Tax Bracket
- A range of taxable income that is taxed at a specific rate within Australia's progressive tax system. Only the income within each bracket is taxed at that bracket's rate, not your entire income. For 2025-26, the brackets are: 0% on the first $18 200 (tax-free threshold), 16% on $18 201 to $45 000, 30% on $45 001 to $135 000, 37% on $135 001 to $190 000, and 45% on income above $190 000. These brackets were updated from 1 July 2024 under the revised Stage 3 tax cuts, which reduced the bottom rate from 19% to 16% and extended the 30% bracket ceiling from $120 000 to $135 000.
- Tax Deduction
- An expense you can claim against your assessable income to reduce your taxable income. The deduction reduces tax at your marginal rate: a $1 000 deduction for someone on a 30% marginal rate saves $300 in tax; the same deduction at 45% saves $450. Common deductions include work-related expenses (uniforms, tools, professional subscriptions, work-related travel), self-education expenses related to your current employment, home office expenses (67 cents per hour under the revised fixed-rate method, or actual costs), donations to registered deductible gift recipients, and the cost of managing tax affairs (accountant fees). Deductions must be supported by records and must have a direct connection to earning your income.
- Tax-Free Threshold
- The amount of income you can earn each financial year before any income tax is payable. For the 2025-26 financial year, the tax-free threshold is $18 200. With the Low Income Tax Offset (LITO), the effective tax-free threshold rises to approximately $22 575. You claim the threshold on your TFN declaration when starting a new job. If you have multiple jobs, you should claim the threshold with only one employer to avoid under-withholding. Non-residents for tax purposes are not entitled to the tax-free threshold and pay tax from the first dollar of income at a rate of 30%.
- Tax Offset (Tax Rebate)
- An amount that directly reduces the tax you owe (your tax liability), as distinct from a deduction which reduces your taxable income. Tax offsets are more valuable dollar-for-dollar than deductions because they reduce tax payable by the full offset amount regardless of your marginal rate. Some offsets are refundable (paid to you even if your tax payable is already zero, such as the franking credit offset) while others are non-refundable (can only reduce your tax to zero but not create a refund, such as LITO). Common offsets include the Low Income Tax Offset, the seniors and pensioners tax offset, the private health insurance rebate, and the franking credit tax offset.
- Tax Return
- The annual tax form (Individual Tax Return) you lodge with the ATO to report all your assessable income, claim deductions, apply tax offsets, and calculate your final tax liability for the financial year (1 July to 30 June). The deadline for self-lodgers is 31 October. If you use a registered tax agent, you may have an extended deadline (typically up to the following May, depending on your circumstances). You can lodge electronically through myTax (the ATO's free online tool), through a tax agent, or through registered tax software. Approximately 75% of individuals receive a tax refund, while 20% have a balance owing, and 5% have a nil result.
- Taxable Income
- The amount of your assessable income remaining after all allowable deductions have been subtracted. Taxable income is the single most important figure in your tax calculation: the ATO's tax brackets, the Medicare levy, LITO, and other tax offsets are all applied to your taxable income to determine your final tax liability. For most PAYG employees with few deductions, taxable income is close to gross salary. For investors with significant deductions (such as negatively geared property losses), taxable income can be substantially lower than total assessable income.
- TFN (Tax File Number)
- A unique nine-digit number issued by the ATO to individuals and organisations for tax and superannuation purposes. You must provide your TFN to your employer on a Tax File Number Declaration form when you start a new job. If you do not provide a TFN, your employer must withhold tax at the top marginal rate (45% plus 2% Medicare levy, totalling 47%) from all your pay. You should also provide your TFN to your bank, investment broker, and super fund to ensure correct tax treatment of interest, dividends, and contributions. Your TFN is a permanent number that does not change if you change jobs, names, or addresses.
W
- Withholding Tax
- The amount of income tax your employer deducts from each pay and remits to the ATO under the PAYG withholding system. The withholding amount is determined by ATO tax tables ("Schedule 1" for regular pay, "Schedule 5" for lump sums) based on your gross pay, pay frequency (weekly, fortnightly, or monthly), whether you have claimed the tax-free threshold, and whether you have declared a HECS/HELP debt. At the end of the financial year, the total amount withheld is reconciled against your actual tax liability when you lodge your return. If too much was withheld (common for workers who had irregular hours or took unpaid leave), you receive a tax refund. If too little was withheld, you receive a tax bill.
- Workers' Compensation
- A state and territory-based compulsory insurance scheme that provides wage replacement, medical benefits, and rehabilitation support to employees who suffer work-related injuries or illnesses. Premiums are paid by employers and vary by industry (higher-risk industries pay more) and by state or territory. Each jurisdiction has its own workers' compensation authority and legislation: icare in NSW, WorkSafe Victoria, WorkCover Queensland, and similar bodies in other states. Workers' compensation insurance covers medical and rehabilitation costs, weekly income replacement payments (typically 85% to 95% of pre-injury earnings for the first 13 weeks), and lump sum compensation for permanent impairment.