Sometimes it might feel like we’re speaking a new language, so we’ve put together a list of common accounting and taxation acronyms and terms we get asked about. If the term you’re looking for is not here, let us know and we will send you a definition.
We’ve also included links to each so you can find out more, feel free to be click happy.
ABN – Australian business number, you will need this if you run a business in Australia, it must be included on every invoice you issue.
Accrual’s basis – this means you will account for GST, income, and expenses when they arise, not necessarily when they are physically paid.
Aggregated Turnover – Your aggregated turnover is your annual turnover (all ordinary income you earned in the ordinary course of running a business for the income year) plus the annual turnover of any entities you’re connected with or that are your affiliates. When we see ‘turnover’, it also means ‘aggregated turnover’.
BAS – Business activity statement, this is the report for the ATO that declares your GST, PAYGW and PAYGI if applicable.
Cash basis – this means you will account for GST, income, and expenses when they’re physically paid.
GST – Goods and services tax, a 10% tax on most goods and services. People in business need to report the GST they have received on sales and GST they have paid on expenses on their BAS. If the GST on sales exceeds the GST paid, you will need to pay this to the ATO. If GST paid exceeds GST collected on sales, you will receive a refund from the ATO. Be warned, not everything has GST, and not everyone is registered so check your receipts.
Hobby – Generally speaking, not a business. If your intent is to make a profit, your business is repetitive or of a scalable nature, your hobby may have turned into a business.
Ordinary income – This is amounts that everyone would consider to be income.
PAYGI – Pay as you go instalments, often implemented by the ATO for the financial year after you have had to pay tax upon lodgement of your tax return. You are effectively prepaying next year’s tax payable. This is for sole traders and companies.
SMSF – Self-managed super fund, a tool used to invest for your future self in retirement!
TFN – Tax file number, this is your personal reference number in the taxation system. If you have a business that operates as a trust, company, superfund, or partnership, you will also need one of these.
Small business entity – You are a small business entity if you are carrying on a business with less than $10 million aggregated turnover. When we say ‘you’ we mean the individual, partnership, company, or trust that runs the business.
Trust – A vehicle used for investment and business purposes. While in legal terms a trust is a relationship not a legal entity, trusts are treated as taxpayer entities for the purposes of tax administration.
Company – A company business structure is a separate legal entity, unlike a sole trader or a partnership structure. This means the company has the same rights as a natural person and can incur debt, sue, and be sued.
Partnership – This is a group or association of people who carry on a business and distribute income or losses between themselves. For example, if you and a friend or family member decide to set up a business together, you might operate it as a partnership.