Glossary of Terms A–Z

183-day test [Chapter 2]
A statutory individual residency limb based on presence in Australia for more than half the income year, subject to specified exceptions.
Key law: s 6(1) ITAA36

Administrative penalty [Chapter 12]
A statutory penalty under the uniform penalty regime for specified compliance failures such as false or misleading statements, late lodgment or scheme shortfalls.
Key law: Pt 4-25 Sch 1 TAA53

Amended assessment [Chapter 12]
A change to an assessment within the applicable statutory amendment period or exception.
Key law: s 170 ITAA36

Apportionment [Chapter 7]
Where an amount serves both income-producing and non-deductible purposes, the law may require a fair and reasonable division.
Key law: s 8-1 ITAA97; Ronpibon Tin

Assessable income [Chapter 1]
The income brought into the income-tax calculation, principally ordinary income and statutory income, subject to exclusions.
Key law: ss 6-5, 6-10 ITAA97

Assessment [Chapter 12]
The Commissioner’s formal ascertainment of a tax liability, subject to the statutory assessment regime.
Key law: ss 166–175 ITAA36

Australian resident [Chapter 2]
A tax-residency status that determines the scope of Australian assessable income. For individuals the operative definition is in the 1936 Act.
Key law: s 995-1(1) ITAA97; s 6(1) ITAA36

Base rate entity [Chapter 1]
A company classification relevant to the lower company tax rate, subject to turnover and passive-income requirements.
Key law: ss 23AA–23AB Income Tax Rates Act 1986

Borrowing expenses [Chapter 10]
Capital costs of obtaining finance can receive a specific deduction over a statutory period when the borrowing is used for assessable-income purposes.
Key law: s 25-25 ITAA97

Business [Chapter 4]
An activity carried on with sufficient commercial character, repetition, organisation, scale and profit purpose; the question is determined from the whole factual picture.
Key law: s 995-1(1) ITAA97

Capital allowance [Chapter 9]
A statutory deduction regime for decline in value of depreciating assets rather than an immediate s 8-1 deduction for capital cost.
Key law: Div 40 ITAA97

Capital gain [Chapter 6]
Broadly, the excess of capital proceeds over the relevant cost base when a CGT event produces a gain.
Key law: Pt 3-1 ITAA97; s 102-5

Capital loss [Chapter 6]
A loss calculated under the CGT provisions. Capital losses generally reduce capital gains and do not directly reduce ordinary income.
Key law: ss 102-10, 102-15 ITAA97

Capital proceeds [Chapter 6]
The amount or value received, or treated as received, from a CGT event, subject to substitution and other rules.
Key law: Div 116 ITAA97

Capital works [Chapter 9]
A separate deduction regime for qualifying construction expenditure on buildings and structural improvements.
Key law: Div 43 ITAA97

Capital/revenue distinction [Chapter 9]
A central characterisation question determining whether expenditure is immediately deductible under s 8-1 or treated under capital provisions.
Key law: s 8-1(2)(a) ITAA97; Sun Newspapers

CGT asset [Chapter 6]
Property or a legal/equitable right that falls within the statutory CGT asset definition.
Key law: s 108-5 ITAA97

CGT discount [Chapter 6]
A statutory reduction available for eligible discount capital gains after the required holding period and subject to the taxpayer and asset rules.
Key law: Div 115 ITAA97

CGT event [Chapter 6]
A statutory event that may trigger a capital gain or loss. Always identify the event before calculating the result.
Key law: Div 104 ITAA97

Collectable [Chapter 6]
A CGT category with special capital-loss quarantining rules.
Key law: s 108-10 ITAA97

Commissioner [Chapter 12]
The Commissioner of Taxation, who has general administration of Commonwealth tax laws and extensive assessment, information and enforcement functions.
Key law: s 3A TAA53; s 1-7 ITAA97

Cost base [Chapter 6]
The statutory collection of expenditure elements used to calculate many capital gains.
Key law: Subdiv 110-A ITAA97

Decline in value [Chapter 9]
The tax depreciation concept used for depreciating assets under Div 40.
Key law: Div 40 ITAA97

Deduction [Chapter 7]
An amount allowed to reduce assessable income when calculating taxable income. It may arise under the general deduction provision or a specific deduction provision.
Key law: ss 8-1, 8-5 ITAA97

Default assessment [Chapter 12]
An assessment the Commissioner may make where no satisfactory return is provided or taxable income is otherwise believed to have been derived.
Key law: s 167 ITAA36

Derivation [Chapter 2]
The timing question: when income is treated as derived for tax purposes. The answer may depend on the nature of the income and accounting method.
Key law: s 6-5 ITAA97

Diminishing value method [Chapter 9]
One statutory method for calculating decline in value of a depreciating asset.
Key law: s 40-70 ITAA97

Domicile test [Chapter 2]
One limb of the individual residency definition; it asks whether the taxpayer’s domicile is in Australia and, if so, whether the permanent place of abode exception applies.
Key law: s 6(1) ITAA36

Effective life [Chapter 9]
A period used in capital-allowance calculations; it may be self-assessed or based on the Commissioner’s determinations.
Key law: Div 40 ITAA97

Enduring benefit test [Chapter 9]
A traditional capital/revenue indicator asking whether expenditure secures an enduring benefit or advantage.
Key law: s 8-1(2)(a) ITAA97; British Insulated

Exempt income [Chapter 1]
Income that would otherwise be income but is expressly made exempt. It is not included in assessable income.
Key law: s 6-20 ITAA97

Fringe benefit [Chapter 3]
A benefit provided in respect of employment that may be dealt with under the FBT regime rather than included in the employee’s ordinary assessable income.
Key law: FBTAA86; s 23L ITAA36

General deduction [Chapter 7]
The central deduction provision, containing two positive limbs and four negative limbs.
Key law: s 8-1 ITAA97

GST [Chapter 1]
A broad-based consumption tax on taxable supplies under the GST Act, distinct from income tax.
Key law: A New Tax System (Goods and Services Tax) Act 1999

Income year [Chapter 1]
The annual period for which income tax is assessed. Always identify the relevant year because law, rates and timing can change.
Key law: ss 4-10, 995-1 ITAA97

Incurred [Chapter 9]
A timing concept for deductions that asks when a taxpayer becomes definitively committed to an outgoing, not merely when cash is paid.
Key law: s 8-1 ITAA97

Interest deductibility [Chapter 8]
Interest is ordinarily characterised by the use of the borrowed funds and the connection between the borrowing and income-producing activity.
Key law: s 8-1 ITAA97; Steele

Isolated profit-making transaction [Chapter 5]
A transaction outside an ordinary business that may nevertheless yield ordinary income where entered into with a profit-making purpose and carried out in a businesslike way.
Key law: s 6-5 ITAA97; Myer Emporium

Low income tax offset [Chapter 1]
A tax offset that may reduce tax payable for eligible low-income individuals, subject to current thresholds.
Key law: Subdiv 61-A ITAA97

Market value substitution rule [Chapter 6]
A rule that substitutes market value for actual consideration in specified CGT circumstances, including some non-arm’s-length or gift transactions.
Key law: ss 112-20, 116-30 ITAA97

Medicare levy [Chapter 1]
A levy imposed separately from basic income tax liability and calculated under the Medicare levy provisions.
Key law: Pt VIIB ITAA36

Negative gearing [Chapter 1]
A practical label for an income-producing investment where deductible expenses exceed assessable income from that investment; the tax result depends on the ordinary deduction and loss rules.
Key law: ss 8-1, 36-10, 36-15 ITAA97

Net capital gain [Chapter 6]
The statutory amount included in assessable income after applying current-year capital losses, prior-year losses, discounts and concessions in the required order.
Key law: s 102-5 ITAA97

Non-assessable non-exempt income [Chapter 1]
An amount that is neither assessable income nor exempt income because the legislation expressly gives it NANE status.
Key law: s 6-23 ITAA97

Objection [Chapter 12]
A formal mechanism for disputing certain taxation decisions under Pt IVC of the Taxation Administration Act.
Key law: Pt IVC TAA53

Once-and-for-all test [Chapter 9]
A traditional indicator in the capital/revenue inquiry: one-off expenditure may point toward capital, though it is not conclusive.
Key law: s 8-1(2)(a) ITAA97; Vallambrosa Rubber

Ordinary income [Chapter 3]
Income according to ordinary concepts, assessed under s 6-5. Characterisation depends on legal principles developed through the cases.
Key law: s 6-5 ITAA97

Part IVA [Chapter 11]
Australia’s general income-tax anti-avoidance regime. It requires analysis of a scheme, tax benefit, alternative postulate and dominant purpose.
Key law: Pt IVA ITAA36, especially ss 177A, 177C, 177D, 177F

PAYG withholding [Chapter 1]
A collection system under which amounts are withheld during the year and generally credited against the taxpayer’s final liability.
Key law: Sch 1 TAA53

Prepayment [Chapter 11]
An expense paid before the relevant services are fully provided; statutory prepayment rules may spread the deduction.
Key law: Subdivision H of Div 3 ITAA36

Private ruling [Chapter 12]
A written ATO ruling about how a tax law applies to a specified taxpayer and arrangement, with statutory consequences where relied upon.
Key law: Div 359 Sch 1 TAA53

Profit-yielding structure [Chapter 9]
The distinction between expenditure on the structure of a business and expenditure in operating that structure.
Key law: s 8-1(2)(a) ITAA97; Sun Newspapers

Public ruling [Chapter 12]
Published ATO advice on how a tax law applies to entities generally or a class of entities, with statutory reliance consequences.
Key law: Div 358 Sch 1 TAA53

Reasonably arguable position [Chapter 12]
A standard relevant to certain administrative penalties where a taxpayer takes a position on the application of a tax law.
Key law: Div 284 Sch 1 TAA53

Repairs [Chapter 10]
Specific deduction rules may allow expenditure on repairs to income-producing property, while improvements and capital replacements can fall outside the repair deduction.
Key law: s 25-10 ITAA97

Resides test [Chapter 2]
The primary ordinary-concepts limb of individual tax residency.
Key law: s 6(1) ITAA36

Review [Chapter 12]
Administrative and judicial review pathways available after an objection decision, subject to Pt IVC requirements.
Key law: Pt IVC TAA53

Self-education expense [Chapter 8]
Education costs may be deductible where sufficiently connected with current income-earning activities, but not where directed to obtaining a new qualification or new income-earning activity.
Key law: s 8-1 ITAA97; TR 2024/3

Source [Chapter 2]
The geographical connection of income. Source is a practical factual question informed by the nature of the income and relevant case law.
Key law: ss 6-5(3), 6-10(5) ITAA97

Specific deduction [Chapter 10]
A deduction conferred by a provision other than the general deduction rule.
Key law: s 8-5; Div 25 and other provisions ITAA97

Statutory income [Chapter 1]
An amount included in assessable income by a specific statutory provision rather than solely by ordinary concepts.
Key law: s 6-10 ITAA97

Tax avoidance [Chapter 11]
Arrangements seeking tax advantages that may attract specific integrity rules or Part IVA; distinguish lawful planning from illegal evasion.
Key law: Pt IVA ITAA36

Tax benefit [Chapter 11]
A statutory concept used in Part IVA analysis, requiring comparison with what would reasonably be expected to have occurred absent the scheme.
Key law: s 177C ITAA36

Tax evasion [Chapter 11]
Illegal conduct involving deliberate non-compliance, concealment or false reporting; it is distinct from lawful tax planning and avoidance analysis.
Key law: TAA53 and offence provisions as applicable

Tax loss [Chapter 1]
A loss calculated under the statutory rules and carried forward subject to the applicable rules for the taxpayer.
Key law: Div 36 ITAA97

Tax offset [Chapter 1]
An amount applied after tax on taxable income is calculated; it reduces tax payable rather than taxable income.
Key law: s 4-10 ITAA97

Taxable income [Chapter 1]
The amount generally calculated as assessable income less deductions.
Key law: s 4-15 ITAA97

Temporary resident [Chapter 2]
A special status that can modify the Australian tax treatment of certain foreign-source income and gains.
Key law: Subdiv 768-R ITAA97

Trading stock [Chapter 4]
Items held for sale, manufacture or exchange in the ordinary course of business, subject to specific tax accounting rules.
Key law: Div 70 ITAA97