Financial Glossary
Comprehensive glossary of Australian financial, tax, and investment terms to help you understand our calculators better.
ABN (Australian Business Number)
An 11-digit unique identifier for businesses registered with the Australian Business Register. Required for GST registration.
Accumulation Phase
Period while working when super is growing through contributions and investment returns.
Age Pension
Government payment for Australians 67+ who meet income and asset tests. Currently $1,116/fortnight (single).
Amortization
The process of paying off a loan through regular payments over time. Each payment covers interest and reduces principal.
Asset Allocation
How investments are divided among asset classes (shares, bonds, property, cash) to balance risk and return.
ATO
Australian Taxation Office - the government agency responsible for administering Australia's tax and superannuation systems.
BAS (Business Activity Statement)
Form used to report and pay GST, PAYG withholding, PAYG installments, and other business tax obligations to the ATO.
Blue Chip
Large, well-established company with reliable earnings. Examples: CBA, BHP, Woolworths.
Capital Gain
Profit from selling an asset for more than you paid. Subject to CGT but may qualify for discounts.
Capital Gains Tax (CGT)
Tax on profit from selling assets like property, shares, or cryptocurrency. Hold assets 12+ months for 50% discount.
Cash Flow
Movement of money in and out of a business. Positive cash flow = more coming in than going out.
Centrelink
Services Australia agency providing government payments and services including JobSeeker, Pension, FTB.
CGT Discount
50% discount on capital gains for individuals and trusts who hold assets for 12+ months before selling.
Comparison Rate
Interest rate that includes most fees and charges, helping compare the true cost of different loans.
Compound Interest
Interest calculated on initial principal plus accumulated interest. The key to long-term wealth building.
Concessional Contributions
Pre-tax super contributions (employer + salary sacrifice) taxed at 15% instead of your marginal rate. Annual cap: $30,000.
Depreciation
The decline in value of an asset over time. Can be claimed as a tax deduction for income-producing assets.
Diminishing Value Method
Depreciation method that applies a higher rate to the remaining asset value each year, giving larger deductions early on.
Diversification
Spreading investments across different assets to reduce risk. Don't put all eggs in one basket.
Dividend
Payment made by a company to shareholders from its profits. In Australia, often includes franking credits.
Dividend Reinvestment Plan (DRP)
Option to automatically reinvest dividends to buy more shares instead of receiving cash payments.
Equity
The difference between your property value and what you owe. Equity = Property Value - Loan Balance.
ETF (Exchange Traded Fund)
Investment fund traded on stock exchange that holds a basket of assets. Lower fees than managed funds, highly liquid.
Extras Cover
Private health insurance covering services not in hospital: dental, optical, physio, etc.
FBT (Fringe Benefits Tax)
Tax paid by employers on non-cash benefits provided to employees. Current rate is 47%.
Feed-in Tariff (FiT)
The rate paid by electricity retailers for excess solar power exported to the grid. Typically 5-12 cents/kWh in Australia.
FHOG (First Home Owner Grant)
State government grant for eligible first home buyers. Amount varies by state ($10,000-$30,000 for new homes).
Fixed Rate
Interest rate locked for a set period (usually 1-5 years). Provides payment certainty but less flexibility.
Franking Credits
Tax credits attached to dividends from Australian companies that have already paid company tax. Can reduce tax or provide refunds.
FTB (Family Tax Benefit)
Government payment helping with cost of raising children. Part A and Part B with different eligibility.
GST (Goods and Services Tax)
10% broad-based consumption tax on most goods and services in Australia. Some items like fresh food are GST-free.
HECS/HELP
Higher Education Contribution Scheme / Higher Education Loan Program - government student loan repaid through tax. FY 2025-26 uses a marginal repayment system: no compulsory repayment below $67,000.
Hospital Cover
Private health insurance covering in-hospital treatment. Needed to avoid Medicare Levy Surcharge.
Index Fund
Fund that tracks a market index like the ASX 200. Low fees, passive management strategy.
Instant Asset Write-Off
Tax deduction allowing businesses to immediately deduct the full cost of eligible depreciating assets up to a threshold.
Interest-Only Loan
Loan where you only pay interest for a period, not reducing the principal. Common for investment properties.
JobSeeker
Income support payment for unemployed Australians aged 22 to pension age who are looking for work.
kW (Kilowatt)
Unit of power. Solar systems sized in kW (e.g., 6.6kW system). 1kW = 1,000 watts.
kWh (Kilowatt Hour)
Unit of energy. Your electricity bill is charged per kWh consumed. 1kWh = running 1kW for 1 hour.
LHC (Lifetime Health Cover)
2% loading per year you delay getting hospital cover after age 31. Max 70%, removed after 10 years.
LITO (Low Income Tax Offset)
Tax offset up to $700 for low-income earners. Reduces gradually for incomes between $37,500-$66,667.
LMI (Lenders Mortgage Insurance)
Insurance protecting the lender if you default on your home loan. Required for deposits under 20%.
LVR (Loan-to-Value Ratio)
The percentage of property value borrowed. LVR = Loan Amount ÷ Property Value × 100. Under 80% avoids LMI.
Marginal Tax Rate
The tax rate applied to each additional dollar of income. Australia has progressive rates: 0%, 16%, 30%, 37%, 45%.
Medicare Levy
2% levy on taxable income to fund Medicare. Low-income earners may qualify for reduction or exemption.
Medicare Levy Surcharge
Additional 1-1.5% levy for high earners without private hospital cover. FY 2025-26 thresholds: $101,000 (singles), $202,000 (families).
Negative Gearing
When investment property expenses exceed rental income, creating a tax loss that reduces taxable income.
Net Present Value (NPV)
Investment analysis accounting for time value of money. Positive NPV indicates a profitable investment.
Non-Concessional Contributions
After-tax super contributions. Not taxed going in but count toward $120,000 annual cap.
Novated Lease
Three-way agreement between employee, employer, and finance company where car payments come from pre-tax salary.
Offset Account
Transaction account linked to mortgage where balance reduces interest calculated. $20k offset on $500k loan = interest on $480k.
Parenting Payment
Government payment for principal carers of children. Higher rate for singles, child age limits apply.
PAYG (Pay As You Go)
Tax withholding system where employers deduct estimated income tax from wages each pay period.
Pension Phase
Super phase after retirement where you draw an income. Investment earnings are tax-free.
PHI Rebate
Government rebate reducing private health insurance premiums. Up to 24.6% depending on age and income.
Portfolio
Collection of investments owned by an individual or organization. Should be diversified.
Preservation Age
Age when you can access superannuation. Currently 60 for those born after 1 July 1964.
Prime Cost Method
Depreciation method spreading asset cost equally over its effective life. Provides consistent deductions each year.
Principal
The original loan amount borrowed, excluding interest. P&I (Principal and Interest) loans reduce this with each payment.
Pty Ltd
Proprietary Limited company. Separate legal entity with limited liability for shareholders.
Redraw Facility
Home loan feature allowing access to extra repayments made. Unlike offset, funds are held in the loan.
Refinancing
Replacing your current home loan with a new one, typically to get a better rate or access equity.
Rent Assistance
Additional Centrelink payment to help with rent costs. Up to $188/fortnight depending on situation.
Rental Yield
Annual rental income as percentage of property value. Gross yield = (Annual Rent / Property Value) × 100.
ROI (Return on Investment)
Measure of investment performance. ROI = (Gain - Cost) / Cost × 100%.
Salary Sacrifice
Arrangement to receive part of your salary as benefits (like super or car) instead of cash, reducing taxable income.
Self-Consumption (Solar)
Percentage of solar energy used directly vs exported to grid. Higher self-consumption = better savings.
Settlement
The final stage of a property purchase where ownership transfers and funds are exchanged.
SGC (Superannuation Guarantee)
Minimum super employers must pay. Currently 12% (FY 2025-26 — final legislated rate, in effect since 1 July 2025).
Small-scale Technology Certificates (STCs)
Government rebate for solar systems. Number depends on system size and location. Reduces upfront cost.
SMSF (Self-Managed Super Fund)
Private super fund you manage yourself. Up to 6 members, must comply with strict ATO rules.
Solar Battery
Storage system holding excess solar energy for use at night or during blackouts. Increases self-consumption.
Sole Trader
Simplest business structure where individual operates under their own TFN. Personally liable for debts.
Split Loan
Mortgage with part fixed rate and part variable rate, combining benefits of both.
Stamp Duty
State government tax on property purchases. Varies by state and property value. First home buyers may get concessions.
Superannuation
Australia's retirement savings system. Compulsory employer contributions plus voluntary contributions.
Tax File Number (TFN)
Unique identifier for tax purposes. Without TFN declaration, employers must withhold tax at highest rate (47%).
Tax Offset
Amount directly subtracted from tax payable (not taxable income). More valuable than deductions.
Tax-Free Threshold
Income up to $18,200 per year is tax-free for Australian residents.
Trust
Legal arrangement where trustee holds assets for beneficiaries. Often used for asset protection and tax planning.
TTR (Transition to Retirement)
Strategy allowing access to super while still working once preservation age is reached.
Variable Rate
Interest rate that can change based on market conditions. More flexible but payments can increase.
VPP (Virtual Power Plant)
Network of solar batteries that can be controlled to support the grid in exchange for credits.
Waiting Period
Time before you can claim on health insurance. 12 months for pre-existing conditions, 2 months for most else.