G'day, mates!
Does any Aussie actually say that? I thought I would as I want to talk about how Accounting / Bookkeeping terms are defined differently here in Australia. Here at LDG - Learn, Develop Grow - I pride myself on being there for the small business person so what better for the SME than a glossary of accounting terms.
So, grab a cuppa and let's have a chin wag about the mysteries of bookkeeping down under!
GST - Goods and Services Tax:
This is Australia’s broad based consumption tax with the idea that if you consume you pay tax; which we all do. It's currently set at 10% (2024) and is collected by businesses on behalf of the Australian Taxation Office (ATO). If you are in business and earning over $75,000 you need to be charging GST and also passing the GST you “consume” through your business. Once you are privileged with charging GST you will need to disclose that information to the ATO at least yearly but most commonly quarterly.
BAS - Business Activity Statement:
Once you are registered for GST you will need to communicate these obligations to the ATO which you will do on a BAS. The frequency of lodging depends on a few things but all BAS Statements summarise the GST you collect from customers and the GST that you have paid out during the reporting period. If you have other tax obligations they will appear on the BAS too because the ATO’s system prefers us to pay up front. Because of this business will declare lots of obligations on the BAS within a financial year. There are also deadlines and time frames which is why it is called “compliance” and is best managed in the hands of a professional.
ABN - Australian Business Number:
This is how a “business” identifies itself to Government bodies in Australia - especially the ATO. It's a unique 11-digit number issued you apply for and is then issued to the business by the ATO. Regardless of what you think you need it for, if you are in business in Australia you will need an ABN.
TFN - Tax File Number:
If you need to report taxes in Australia you need a Tax File Number. From individuals to huge companies, even charities and many clubs have a TFN. This was in place before the ABN was introduced so it might seem like they overlap. Just think of it as your passport and your birth certificate. They both ID you but sometimes circumstances will require you to have a passport.
PAYG - Pay As You Go:
Suddenly I feel Australia is quite literal. PAYG is the system in Australia that basically says if you're earning please pay some tax, NOW.
Employees pay PAYG from their wages each pay period this is held by the employer and paid to the ATO (on the BAS). If your business earns money it also pays PAYG in instalments too. So a lot of businesses will have PAYGW (Pay As You Go Withholding - employees) and PAYGI (Pay as you Go Instalments - business tax) on the BAS.
Superannuation:
Is a very big word so of course us Aussies shorten this to “Super”, which is the compulsory retirement savings that an employer makes on behalf of their employees. However it can be paid in other ways too.
ATO - Australian Taxation Office:
Everyone just calls it the ATO. This is the Australian government agency responsible for administering the tax system and ensuring compliance with taxation laws. The ATO oversees various tax obligations, including income tax, GST, PAYG withholding, and superannuation.
While they may seem to be the scary big brother, they are also very forthcoming with helpful information and even some free training. Have a good look through their website as you might be surprised at how much helpful information is there.
Depreciation:
Depreciation is the gradual decrease in the value of assets over time. In Australia, businesses can claim depreciation expenses as tax deductions. For more in depth and specific advice on what and how to depreciate, reach out to your friendly Tax Accountant or your BAS agents / bookkeepers. We can setup the journal for you making it nice and easy.
Fringe Benefits Tax (FBT):
If you provide non-cash benefits to your employees or associates, such as company cars, expense payments, or health insurance, (although not those long lunches) you may be liable to pay FBT. It's a separate tax imposed on employers and is calculated based on the taxable value of fringe benefits provided. Again this needs to prepared and advised on by your Tax Agent.
ATO Portal:
The ATO Portal is an online platform provided by the Australian Taxation Office for businesses and individuals to manage their tax affairs. It allows you to lodge activity statements, tax returns, and other forms, as well as access various tax-related services and information. BAS agents and Tax Agents have one that allows us to lodge on behalf of our clients.
Tax Agent:
An accounting professional that is registered with the Tax Practitioners Board to provide advice on and actual lodgements of all taxes on their clients behalf. If you're not sure if your accountant is registered, you can check on the public register.
BAS Agent:
An Accounting professional that is registered with the Tax Practitioners Board to give advice and lodgements of certain taxes, like GST, PAYG and Super (not technically a tax but definitely more “compliance”).
While there's probably a lot more terms available, these will get you started. If you do come across any terms that you're not sure of the meaning, just reach out and I'll help unravel the confusion.
