Your guide to Australian tax terms you pretend to understand
Tax time comes around every year, and let’s face it, most of us smile and nod while secretly feeling lost whenever certain tax terms come up. You’re not alone—tax jargon can be confusing! This guide simplifies some common Australian tax terms so you can feel more confident next time tax season arrives.
Income tax
This one’s straightforward. Income tax is money you pay to the government based on the money you earn. In Australia, the more you earn, the higher the percentage of tax you’ll pay (this is called a progressive tax system).
Taxable income
Your taxable income is what remains after you subtract allowable deductions from your total income. It’s the final amount your tax will be calculated on. Lowering your taxable income through valid deductions can reduce the tax you owe.
Deductions
Deductions are expenses directly related to earning your income. For example, work uniforms, professional memberships, or home office expenses. Claiming these reduces your taxable income, meaning you could owe less tax or receive a larger refund.
PAYG (Pay As You Go)
PAYG stands for “Pay As You Go”. It means your employer withholds some of your income each pay cycle and sends it directly to the ATO (Australian Taxation Office). Essentially, you’re paying your taxes throughout the year rather than all at once.
Tax offsets
A tax offset (also called a rebate) directly reduces the amount of tax you owe. Unlike deductions, offsets don’t lower your taxable income but instead reduce your final tax bill. Common offsets include the low and middle-income tax offset and private health insurance rebate.
Medicare levy
The Medicare levy is an additional amount you pay on top of your regular income tax, typically 2% of your taxable income. This helps fund Australia’s public healthcare system.
Medicare levy surcharge
Separate from the standard Medicare levy, this surcharge applies if you earn above a certain threshold and don’t have private health insurance. The surcharge ranges from 1% to 1.5% of your taxable income.
Superannuation (Super)
Superannuation, commonly called ‘super’, is a mandatory retirement savings system in Australia. Your employer contributes 12% (as of July 2025) of your salary into a super fund, some employers contribute more based on your employment contract. Super contributions typically receive favourable tax treatment, meaning they’re taxed at a lower rate.
Fringe Benefits Tax (FBT)
FBT is a tax your employer pays if they provide you with certain perks or benefits outside your regular salary, such as a company car or free gym membership. Generally, this tax doesn’t directly impact you, but it’s useful to know why your employer may limit certain benefits.
Capital Gains Tax (CGT)
CGT is a tax on the profit you make from selling certain assets like shares, investment properties, or other investments. Your family home is generally exempt from CGT.
Tax File Number (TFN)
Your TFN is a unique personal identifier used by the ATO to track your income, super, and tax obligations. You don’t legally have to provide it but withholding it can result in higher tax being deducted from your income.
Notice of Assessment (NOA)
Your Notice of Assessment is a document sent by the ATO once you’ve lodged your tax return. It details your taxable income, the tax you owe or any refund you’re entitled to, and other important information about your tax affairs.
Understanding these common tax terms can help make tax season feel less intimidating. Remember, if you’re unsure about any tax-related matters, it’s always a good idea to seek guidance from a registered tax professional or financial advisor.
Tax statements for the previous financial year are typically available to download through the Raiz app in the 3rd week of July each year. For a thorough guide on how to use your Raiz Tax Statement while preparing your tax return, click here.
Ready to tackle tax time with confidence this year? You’ve got this!
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This blog post has been issued by Instreet Investment Limited (ACN 128 813 016 AFSL 434776) as Responsible Entity of the Raiz Invest Australia Fund (ARSN 607 533 022).
Raiz Invest Australia Limited (ABN 26 604 402 815) (Corporate Authorised Representative of Instreet Investment Limited ABN 44 128 813 016, AFSL 434776) is the promoter of Raiz Invest Super, a Division of AMG Super. The Product Disclosure Stament (PDS), Member Guide and Target Market Determination (TMD) are issued by Equity Trustees Superannuation Limited (AFSL 229757, RSE Licence No L0001458) as Trustee of AMG Super.
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