Brokerage A fee charged by a financial adviser or stockbroker for a transaction. This fee increases the cost base of an asset and decreases the taxable profit from the sale of an asset.

Capital Gains Tax (CGT) A tax on the gains of certain assets, payable only when the capital gain is realised by selling the asset. Common assets subject to CGT are investments such as property or shares, but other assets like artworks can also be subject to CGT.

Deductible Expenses that can be offset against assessable income to reduce the amount of tax payable.

Dividend The payment of a company’s earnings to its shareholders. The dividend is usually expressed as an amount per share.

Distributions Income payments from managed investments or from trusts. Such payments comprise a share of any net income and realised capital gains earned by an investment or trust over a financial year. The components which generally make up a distribution are profits from the sale of assets and income from Australian and overseas sources.

Employment Termination Payment (ETP) Certain lump sum payments by an employer to an employee on cessation of employment. These exclude certain routine payments like amount for unused annual leave or long service leave, but include special payments like amounts in lieu of notice or ‘golden handshakes’.

Equity (1) A share investment, or (2) the part of an asset owned by an individual over and above any debt against the asset.

Family Tax Benefit (FTB) A Government payment you may be eligible to receive to help with the cost of raising your dependent children. FTB has two parts. You or your spouse may be eligible for FTB Part A or FTB Part B, or both. Each has different eligibility criteria. For more information, contact us or the Family Assistance Office.

Family Trust Election (FTE) An election made to make a trust a 'family trust' for taxation purposes. Being considered a 'family trust' for taxation purposes exempts the trust from, or substantially reduces the impact of, a number of more onerous legislative provisions that apply to trusts.

Franked Dividends Dividends which include an Imputation Credit (refer 'Imputation Credit' below).

Fringe Benefit Tax (FBT) A tax paid by employers on certain benefits provided to their employees or their employees’ associates (typically family members) in place of, or in addition to, salary and wages. FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.

Gearing (1) A measure of the debt ratio, which is the amount of borrowing compared with the equity in an asset, (2) Borrowing to invest, such as when purchasing a house using a mortgage or purchasing a share portfolio using a margin loan.

Imputation Credit Taxation credits which are passed on to shareholders who have received franked dividends from holding shares or managed share investments. As companies pay tax on their profits prior to paying dividends, the tax credits ensure that the profits are effectively only taxed once when received by shareholders.

Interposed Entity Election (IEE)  An election that makes an entity (say, a company, partnership or trust) a member of the family group of an individual specified in a Family Trust Election (refer above).   This is required where a 'family trust' wants to distribute income to a beneficiary other than an individual in the family group, otherwise withholding tax may be payable at the top marginal rate.  It also releases the family trust from the obligation of the beneficiary reporting rules.

Liquidate To sell an asset or investment or to covert an investment into cash.

Negative Gearing Purchasing an investment with borrowed funds where the interest on the borrowing exceeds the income from the investment.

Net Asset Value The value of an organisation, which is calculated by subtracting the value of its liabilities from the value of its assets.

Novated Lease A commonly salary packaged lease where an employee enters into a lease agreement – typically for a car – and then sub-leases the asset to their employer who pays the lease rentals. The employee , however, remains legally liable for the debt, even if they cease employment with that employer.

Option A right rather than an obligation, giving the holder an option to buy or sell a specified quantity of an underlying asset at some time in the future, at an agreed price.

Personal Services Business If income is Personal Services Income (refer definition below), but you pass certain Taxation Office tests, you may be considered to be conducting a Personal Services Business (PSB). This would mean that the PSI rules may not apply, which would otherwise restrict certain deductions and attribute all income to you personally, even if legally earned through, say, a trust or company. Among other things, the tests concern the basis on which you charge fees to your customers, the number of separate clients you have, whether you employ staff and their roles, and whether you conduct your business from a premises located away from your home.

Personal Services Income Generally speaking, Personal Services Income (PSI) is business income which you generate primarily from using your own expertise and skills. Income you make from charging hourly fees to act as a project consultant, for example, would generally be considered PSI, whereas business income from, say, selling stock or hiring equipment, is not PSI. The concept of PSI is the subject of considerable legislation and case law, and is significant as PSI generated through an entity (like a trust or company, for example) must generally be treated for taxation purposes as though it were the income of the person who generated that income, rather than income of the entity.

Product Disclosure Statement A legal information document which must be provided to you before you buy or invest in any superannuation, insurance, managed investment or bank account. This details how the product operates, the fees and commissions payable, the risks and benefits from investing and other information relevant in your decision whether to invest.

Reinvest Where income from an investment is used to make an additional investment, often at no fee, to allow greater returns through the benefit of compounding.

Salary Sacrifice An amount of pre-tax salary that an employee agrees to contribute to superannuation or allocate to fringe benefits instead of taking it as cash.

Security (1) An asset traded on a financial market, such as shares, units or bonds, or (2) An asset pledged to ensure the repayment of a loan.

Shares Represents ownership in part of a company. When you buy a share in a company you become a joint owner of the business and share in the future of that business. Also known as equity.

Undeducted Contributions A term given to after-tax money which is invested in a superannuation fund. Known from 1st July, 2007 as Non-Concessional contributions. Contributions made for which tax deductions have not been claimed are generally Non-Concessional contributions.

Unit Price The price for each unit of a unit trust. This is calculated by dividing the net value of the trust by the number of units on issue to investors.

Unit Trust A trust where the only beneficiaries are the holders of ‘units’ in the trust, whose interest is usually quantified by the number of units they hold. In a fixed unit trust, the proportion of units held in relation to the total units issued dictates the share of trust income payable to the unit holder. Units in some unit trusts are traded on stock exchanges like shares.

Unrealised Capital Gain A gain occurring when an investment or asset increases in value, but the asset is not sold (or ‘realised’) and is still held.

Yield The dividend distribution or interest paid on an investment expressed as a percentage of the price of the investment.