This glossary defines the finance, payroll, tax, employment and reporting terms Australian business owners encounter in their own books, payroll and ATO correspondence. Every definition is written in plain English, covers the Australian position specifically, and links to a fuller explanation where one exists. It is maintained by Scale Suite, a Sydney-based outsourced finance provider, registered BAS Agent 26298194 and member of Chartered Accountants Australia and New Zealand.
Last reviewed: August 2026
Where a rate, threshold or penalty amount changes from year to year, this glossary describes how the rule works and points you to the authority that publishes the current figure, rather than quoting a number that will be out of date within months.
An activity statement revision is a correction to a business activity statement or instalment activity statement you have already lodged. It replaces the original figures for that period rather than adjusting a later statement. Whether you revise or correct in a later period depends on the type and size of the error, and the ATO sets thresholds for which approach is available. Revisions matter because GST coding errors usually repeat: the same supplier miscoded in one quarter is almost always miscoded in every quarter since the error was introduced, so the correct first step is establishing how far back it goes rather than fixing the most recent statement. Voluntarily correcting an error generally puts you in a better position than having it found. See how to prepare and lodge a BAS in Australia.
An ATO payment plan is an arrangement to pay a tax debt in instalments rather than in full by the due date. Plans are available for activity statement and income tax debts, and many can be set up through ATO online services without speaking to anyone. A payment plan stops recovery action while you comply with it, but it does not stop general interest charge accruing on the outstanding balance, and it does not remove the obligation to lodge on time. Businesses often assume a plan pauses everything; it does not. Defaulting on a plan generally makes the ATO less willing to offer another. See ATO payment plans and what they do and do not pause.
A business activity statement is the form Australian businesses use to report and pay GST, PAYG withholding, PAYG instalments and several other obligations to the ATO. Most small businesses lodge quarterly; larger businesses lodge monthly. The statement reports what you collected and what you are entitled to claim, and the net result is either a payment or a refund. Only you, a registered BAS agent or a registered tax agent may prepare and lodge a BAS for a fee. Registered agents also access lodgement concessions that are not available to businesses lodging directly, which in practice extends the deadline. See what is a business activity statement.
A director penalty notice is a notice from the ATO that makes a company director personally liable for certain unpaid company tax debts, principally PAYG withholding, GST and superannuation guarantee charge. The notice comes in two forms. Where the company has lodged on time, the director generally has options to avoid personal liability, including paying the debt or placing the company into administration or liquidation within the notice period. Where the company has not lodged, personal liability may be automatic and cannot be avoided by appointing an administrator. That difference is the single strongest argument for lodging even when you cannot pay. See director penalties in Australia.
Division 7A is the part of Australian tax law that treats certain payments, loans and forgiven debts from a private company to its shareholders or their associates as deemed dividends, taxable in the recipient's hands. It exists to stop company profits being extracted tax-free as a loan. In practice it catches owner-operators who draw money from the company through the year and record it as a loan account. Where a loan is put on complying terms with a written agreement, minimum yearly repayments and a benchmark interest rate, the deemed dividend can be avoided. This is registered tax agent territory rather than bookkeeping. See Division 7A for owner-operators.
A failure to lodge penalty is an administrative penalty the ATO applies when a return or activity statement is lodged after its due date. The penalty accrues in blocks of 28 days from the due date, up to a maximum number of blocks, and the amount per block is multiplied for medium and large entities. The penalty applies whether or not you owe money, so a refund statement lodged late can still attract it. Penalty unit amounts are indexed periodically, so confirm the current figure with the ATO. Lodging on time and arranging a payment plan is almost always cheaper than lodging late. See ATO failure to lodge penalties.
Fringe benefits tax is a tax paid by employers on certain non-cash benefits provided to employees or their associates, such as a car available for private use, entertainment, or paying an employee's private expenses. It is separate from income tax, has its own year ending 31 March, and is calculated on the grossed-up taxable value of the benefit. Businesses are frequently caught by benefits they did not think of as benefits: the ute available at weekends, the Christmas function, the phone plan. Preparation and lodgement of an FBT return is a registered tax agent service. See fringe benefits tax in Australia.
General interest charge is the interest the ATO applies to unpaid tax debts, including amounts under a payment plan. It compounds daily and the rate is set quarterly by reference to a market rate plus an uplift, so it is typically well above commercial lending rates. From 1 July 2025 the general interest charge is no longer deductible for income tax purposes, which materially increases the effective cost of carrying an ATO debt and changes the arithmetic on whether to refinance it. Confirm the current rate with the ATO before modelling it. See GIC is no longer deductible and the real cost of ATO debt.
GST is a broad-based tax of 10 per cent on most goods, services and other items sold or consumed in Australia. Businesses registered for GST collect it on their taxable sales, claim credits for the GST included in their business purchases, and report the net position on a business activity statement. Registration is compulsory once turnover reaches the registration threshold, and optional below it. The practical difficulty is not the rate, it is the classification: knowing which sales are taxable, which are GST-free and which are input-taxed determines whether your BAS is right. See how to register for GST.
GST-free and input-taxed supplies are two different categories of sale that do not attract GST, and confusing them is a common and costly error. On a GST-free supply, such as most basic food, most health services and exports, no GST is charged and the business can still claim credits for the GST on its related purchases. On an input-taxed supply, such as residential rent and most financial supplies, no GST is charged and the business cannot claim credits on related purchases. The difference determines whether a whole category of your input tax credits is claimable. See GST rules bookkeeping cheat sheet.
An instalment activity statement is a form used to report and pay obligations such as PAYG withholding and PAYG instalments in periods where you are not reporting GST. Businesses that report GST quarterly but withhold PAYG monthly will typically lodge an IAS in the two months between each quarterly BAS. It is the same reporting obligations, split across a different cycle. Businesses often assume any statement with a payment attached is a BAS, which causes confusion when reconciling ATO account balances. See IAS versus BAS.
Intercompany transactions are transfers, loans, recharges and management fees between entities in the same group. Entity A's receivable must equal Entity B's payable. If the two files are maintained separately they drift, usually by a small amount every month, until someone has to reconstruct years of transfers. Group finance means both sides are maintained by the same team and reconciled monthly. See multi-entity bookkeeping, intercompany loans and group reporting.
The instant asset write-off is a tax measure that allows eligible businesses to immediately deduct the business portion of the cost of an eligible asset in the year it is first used or installed ready for use, rather than depreciating it over several years. The threshold amount and eligibility rules have changed repeatedly, sometimes retrospectively, so both the current threshold and the aggregated turnover limit must be confirmed for the relevant income year. The deduction affects taxable income, not cash: you still pay for the asset in full. See instant asset write-off 2026-27.
PAYG instalments are regular prepayments toward your expected income tax liability for the current year, paid through the activity statement system. The ATO enters you into the system based on income reported in your last return, and calculates either an instalment amount or an instalment rate applied to your actual income. Where your circumstances have changed materially, for example a bad year following a good one, you can vary the instalment rather than overpaying and waiting for a refund at year end. Varying too far down attracts interest, so it needs to be a considered estimate rather than optimism. See PAYG instalments in Australia.
PAYG withholding is the amount an employer withholds from employee wages and certain other payments and remits to the ATO on the employee's behalf. It is reported through Single Touch Payroll at each pay event and paid through the activity statement system. The amount withheld comes from the ATO tax tables and depends on the employee's declared circumstances, including whether they claim the tax-free threshold and whether they have a study loan. Withheld amounts are held on trust for the ATO, which is why unpaid PAYG withholding is one of the debts that can be pushed onto directors personally. See what is PAYG withholding.
A payment reference number is the identifier that tells the ATO which account and which obligation a payment relates to. Different obligations often have different PRNs, so a payment made with the wrong reference can be correctly received and incorrectly allocated, leaving one account in credit and another accruing interest. Businesses discover this when a debt they believed they had paid appears on an ATO statement. The PRN is shown on the relevant activity statement or in ATO online services. See how to find your ATO payment reference number.
A taxable payments annual report is an annual report to the ATO of payments made to contractors, required from businesses in specified industries including building and construction, cleaning, courier and road freight, information technology, and security and investigation services. It is due after the end of the financial year and reports the contractor's ABN, name, address and the gross amount paid including GST. The ATO uses it to data-match against contractors' own returns. Businesses in mixed industries often need to work out whether the relevant payments exceed the proportion that triggers the obligation. See TPAR guide 2026.
A superannuation clearing house is a service that accepts a single payment from an employer and distributes it to multiple employee super funds under the SuperStream data standard. The ATO's Small Business Superannuation Clearing House closed on 1 July 2026, so employers who used it have moved to a commercial clearing house, usually the one built into their payroll software. Clearing house processing time now matters directly, because superannuation must be received by the fund within seven business days of payday, and the clearing house sits inside that window rather than outside it. See SBSCH gone: clearing house options compared.
Leave loading is an additional payment, commonly 17.5 per cent, made on top of ordinary pay when an employee takes annual leave. It originated to compensate shift and overtime workers for earnings lost while on leave, and it applies where a modern award, enterprise agreement or employment contract provides for it. Whether it applies to your staff depends on the instrument covering them, not on general practice. Its superannuation treatment depends on why the loading is paid, which is a common source of underpaid superannuation because payroll systems default one way or the other. See what is leave loading in Australia.
Long service leave is a period of paid leave that accrues to employees after an extended period of continuous service with one employer. It is governed by state and territory legislation rather than by the national system, so the qualifying period, the accrual rate and the rules on pro-rata payment on termination differ depending on where the employee works. Some industries, notably building and construction, operate portable schemes where entitlements move with the worker between employers. The liability accrues quietly on your balance sheet for years before anyone takes it. See long service leave calculator by state.
Ordinary time earnings is the measure of employee earnings that was used to calculate superannuation guarantee obligations before Payday Super. It broadly covered earnings for ordinary hours of work, including many allowances, commissions and shift loadings, but excluded overtime. From 1 July 2026 superannuation is calculated on qualifying earnings instead, a broader concept that brings together ordinary time earnings and certain other payments. OTE remains relevant for historical periods, including any superannuation guarantee shortfall being remediated for earlier years. See qualifying earnings versus OTE.
Qualifying earnings is the earnings base used to calculate superannuation guarantee contributions from 1 July 2026, replacing ordinary time earnings for current periods. It is broader than OTE and brings in certain payments that were previously outside the superannuation calculation. Classification now has to be right on every pay run, because there is no quarterly buffer left in which to correct it. OTE remains relevant for historical shortfalls. Confirm the current ATO definition for the year you are paying. See qualifying earnings versus OTE.
Payday Super is the Australian superannuation reform that took effect on 1 July 2026, requiring employers to pay superannuation guarantee contributions at the same time as wages rather than quarterly. Contributions must be received by the employee's fund within seven business days of payday, calculated on qualifying earnings, with a longer window for a new employee's first contribution. The change removes the quarterly buffer that previously allowed errors to be corrected before payment was due, so classification and payment pathway errors now become compliance failures within days. See Payday Super is now live.
Payroll tax is a state and territory tax on the wages an employer pays, charged once total Australian wages exceed the threshold set by the relevant jurisdiction. Each state and territory sets its own threshold, rate, grouping rules and definition of wages, and none of them are required to align. The wages base is broader than salary, generally including superannuation, many allowances, fringe benefits and certain contractor payments. Because thresholds and rates are adjusted periodically, always confirm the current position with the relevant revenue office for the financial year concerned. See payroll tax in Australia.
Payroll tax grouping is the set of state and territory rules that treat related businesses as a single employer for payroll tax, so that one threshold applies to the group's combined Australian wages rather than to each entity separately. Grouping is typically triggered by common ownership, common control, shared employees or a chain of related entities. It catches growing businesses because entity structures chosen for asset protection or operational reasons create a group without anyone intending to. The tests differ by jurisdiction, so grouping in one state does not automatically mean grouping in another. See payroll tax grouping.
A payroll tax threshold is the level of annual Australian wages above which an employer becomes liable for payroll tax in a given state or territory. Each jurisdiction sets its own, and where an employer pays wages in more than one, the threshold is generally apportioned according to the share of wages paid in each. Thresholds are adjusted periodically and some jurisdictions phase the benefit out for larger employers. Because the figures move, confirm the current threshold with the relevant revenue office rather than relying on last year's number. See state by state payroll tax thresholds and rates.
Redundancy pay is the amount an employer must pay an employee whose job is no longer required to be performed by anyone, calculated by reference to the employee's period of continuous service under the National Employment Standards or a more generous instrument. Small business employers, as defined in the Fair Work Act, are generally exempt from the NES redundancy pay obligation, though other entitlements still apply. Redundancy must be genuine: if the role continues in substance under a different title, it is not a redundancy and the dismissal may be unfair. See Australian redundancy and retrenchment.
Simpler BAS is the ATO reporting method available to most small businesses, under which GST is reported in less detail on the activity statement. It reduces the number of labels you complete. It does not reduce the need to code transactions correctly in the ledger, because the totals still have to be right. Eligibility depends on GST turnover. Confirm the current threshold with the ATO. See GST BAS simplified Australia.
Single Touch Payroll is the system through which Australian employers report payroll information to the ATO each time they pay employees, rather than annually. Phase 2 expanded what must be reported, requiring gross pay to be disaggregated into components such as overtime, bonuses, allowances and paid leave, and adding employment and income type reporting. That disaggregation is what allows the ATO to check superannuation and withholding at a granular level, and it is why incorrect pay item mapping in payroll software creates reporting errors rather than merely presentational ones. See Single Touch Payroll compliance guide.
The superannuation guarantee is the compulsory contribution employers must make to a complying superannuation fund for eligible employees, on top of wages. The rate reached 12 per cent from 1 July 2025 and, from 1 July 2026, contributions are calculated on qualifying earnings and must reach the fund within seven business days of each payday. Superannuation is generally payable for contractors who are paid wholly or principally for their labour, which is where many businesses have unrecognised exposure. Confirm the current rate and maximum contribution base with the ATO for the relevant year. See superannuation guarantee: what employers actually pay.
The superannuation guarantee charge is the amount an employer becomes liable for when superannuation guarantee contributions are not received by the fund in full and on time. It is more expensive than the contribution it replaces: it includes the shortfall, an interest component, and an administrative amount, and unlike the contribution itself it is not tax deductible. Under Payday Super the charge starts accruing after the seven business day window closes rather than after a quarter, so the exposure builds far faster than under the old rules. Voluntary disclosure generally reduces the additional penalties. See SGC under Payday Super: penalty mechanics.
Super stapling is the rule that links an employee to a single existing superannuation fund that follows them between jobs, so a new employer must pay into that stapled fund rather than defaulting the employee into the employer's own default fund. Where a new employee does not choose a fund, the employer must request the stapled fund details from the ATO before paying into a default. Skipping the stapled fund check is a compliance failure that can attract additional charges, and it is a step commonly missed when onboarding is handled informally. See super stapling and onboarding.
Tracking categories are a Xero feature used to split reporting inside a single organisation, for example by location, department or job. They are not a substitute for separate legal entities. Running two companies through one Xero file with tracking categories fails at the first BAS, because GST, payroll and financial statements are entity-level legal obligations. Groups need one organisation per entity and a consolidation on top. See multi-entity finance.
Termination pay is the total amount owing to an employee when their employment ends, which typically includes wages to the final day, accrued and unused annual leave, any applicable leave loading, payment in lieu of notice where notice is not worked, redundancy pay where it applies, and long service leave where the state entitlement has been met. Different components attract different tax treatment and different superannuation treatment, which is why final pay is one of the most error-prone payroll calculations. Getting it wrong creates both an underpayment and a withholding error. See how to calculate final pay in Australia.
An annualised salary arrangement is an agreement to pay an employee a single annual salary that absorbs entitlements they would otherwise receive separately under a modern award, such as overtime, penalty rates and allowances. Several awards permit these arrangements only on strict conditions, which commonly include specifying which entitlements are absorbed, recording hours worked, and reconciling the salary against what the award would have produced at least once a year. Failing to reconcile is a widespread source of underpayment in professional workplaces, because the arrangement is set up once and never checked again. See annualised salary reconciliation.
An award classification is the level within a modern award that determines an employee's minimum pay rate and conditions, based on the duties they actually perform, their qualifications and their level of responsibility. Classification is driven by the work, not by the job title on the contract, so an employee whose duties have expanded may have moved up a level without anyone changing their pay. Misclassification is one of the most common causes of systemic underpayment, because the error applies to every pay run and compounds over years. See award classification errors.
Casual conversion is the pathway by which an eligible casual employee can become a permanent part-time or full-time employee. The framework has changed in recent years, moving toward an employee choice process supported by an employer obligation to provide the Casual Employment Information Statement at defined points. Employers need to know which of their casuals are eligible, what notification obligations apply and by when, because the obligations sit with the employer even when the employee initiates. Confirm the current requirements with the Fair Work Ombudsman, since this area has been amended repeatedly. See casual conversion in Australia.
Casual loading is the additional percentage paid to casual employees in place of entitlements permanent employees receive, principally paid annual leave, paid personal leave and notice of termination. The loading is set by the applicable modern award or agreement and is commonly 25 per cent. Its purpose matters practically: where a worker engaged as a casual is later found to have been a permanent employee in substance, the loading already paid may be able to be offset against the entitlements claimed, but only where the arrangement was documented properly. See casual versus permanent cost converter.
The contractor versus employee distinction determines whether a worker is engaged under a contract of service, with entitlements to wages, leave, superannuation and award coverage, or a contract for services as an independent business in substance. The characterisation is decided by the substance of the relationship and, following recent High Court decisions and legislative change, by the terms of the contract read alongside the real working arrangement. Labelling someone a contractor does not make them one. Getting it wrong creates exposure across superannuation, payroll tax, leave entitlements and workers compensation at once. See contractor versus employee classification checklist.
A modern award is an industry or occupation-based instrument that sets minimum pay rates and conditions for employees covered by it, sitting above the National Employment Standards. There are more than one hundred modern awards, and most Australian employees are covered by one. Coverage is determined by the industry the employer operates in or the occupation the employee performs, which means a single business can have staff across several awards. Award coverage overrides an employment contract to the extent the contract is less generous, regardless of what both parties agreed. See understanding and using the Fair Work system.
The National Employment Standards are the minimum entitlements that apply to most employees in the national workplace relations system, regardless of any award, agreement or contract. They cover matters including maximum weekly hours, requests for flexible working, parental leave, annual leave, personal and carer's leave, compassionate leave, community service leave, long service leave, public holidays, notice of termination and redundancy pay, and the requirement to provide the Fair Work Information Statement. An employment contract cannot reduce an NES entitlement, and a term that attempts to do so has no effect. See types of employment contracts in Australia.
Penalty rates are higher rates of pay required for work performed at particular times, such as evenings, weekends, public holidays or outside ordinary hours, set by the applicable modern award or agreement. They vary substantially between awards, and the same hours worked in a restaurant, a retail store and a warehouse can attract three different loadings. Penalty rate errors are common in businesses with rostered or casual workforces, particularly where payroll software has been configured once with a single default rate and never revisited as the roster changed. See public holiday penalty cost calculator.
Sham contracting is the practice of representing an employment relationship as an independent contracting arrangement, whether to avoid paying entitlements or otherwise. It is prohibited under the Fair Work Act, and the prohibitions cover misrepresenting employment as contracting, dismissing an employee in order to re-engage them as a contractor, and making knowingly false statements to persuade someone to become a contractor. Penalties apply in addition to the back payment of entitlements. The distinction from an honest classification error is the employer's knowledge and conduct, not the outcome. See contracting versus employment.
Underpayment remediation is the process of identifying, quantifying and correcting wages, entitlements or superannuation that were paid below the legal minimum. A proper remediation establishes the scope and the period affected, calculates the shortfall per employee including superannuation and interest, decides on disclosure to the Fair Work Ombudsman where appropriate, communicates with affected staff, and fixes the underlying cause so the error does not continue. Intentional underpayment of wages has been a federal criminal offence nationally since 1 January 2025, which raises the stakes on handling a discovery properly rather than quietly. See found an employee underpayment: the remediation process.
Workers compensation is the state and territory-based insurance scheme that covers employees for work-related injury and illness, funded by employer premiums. Each jurisdiction runs its own scheme with its own name, its own premium calculation and its own rules, so a business employing across state borders holds multiple policies. Premiums are typically based on declared wages and industry classification, with actual wages reconciled at the end of each period, which means understating wages creates a shortfall rather than a saving. Cover is generally compulsory from the first employee. See workers compensation in Australia.
Accounts payable is the money your business owes to suppliers for goods and services already received but not yet paid for, and the process of managing those obligations. On the balance sheet it is a current liability. Operationally it covers invoice capture, coding, approval, payment scheduling and supplier statement reconciliation. The two things that go wrong most often are coding, which determines whether your profit and loss is meaningful, and statement reconciliation, which is what catches missing and duplicate invoices before they distort a month end. See outsourced accounts payable.
Accounts receivable is the money owed to your business by customers for goods and services already delivered but not yet paid for, and the process of collecting it. On the balance sheet it is a current asset, and in practice it is the largest lever most SMEs have over their cash position. The gap between revenue and cash in the bank is usually sitting in receivables. Managing it well means consistent follow-up on a defined cadence, accurate allocation of payments, and modelling actual customer payment behaviour rather than invoice terms. See outsourced accounts receivable.
An accrual is an accounting entry that records revenue earned or an expense incurred in the period it relates to, even though the cash has not yet moved. If your electricity bill for June arrives in July, an accrual puts the cost in June where it belongs. Accruals are what make monthly reporting comparable: without them, a month with two rent payments looks worse than a month with none, and neither figure reflects trading. They are raised at month end and reversed when the actual transaction is recorded. See month-end close process for Australian SMEs.
Accrual and cash accounting are two bases for recognising transactions. Under accrual accounting, revenue is recognised when earned and expenses when incurred, regardless of when money moves. Under cash accounting, both are recognised when cash is received or paid. Accrual gives a truer picture of trading performance and is required for most companies for financial reporting. Cash accounting is simpler and, for GST, is available to businesses under the ATO's turnover threshold, which can help cash flow because you remit GST when you are paid rather than when you invoice. Many businesses report GST on cash and their accounts on accrual. See cash versus accrual accounting in Australia.
A bank reconciliation is the process of matching every transaction recorded in your accounting file against the transactions on your bank statement, so that the two agree and any difference is explained. It is the foundation control in bookkeeping: an unreconciled ledger cannot produce a reliable profit figure, a defensible BAS or a usable cashflow forecast. Reconciliation done weekly catches errors while they are still easy to trace. Done quarterly, it becomes an archaeology exercise, and the transactions nobody can identify tend to be coded to a suspense account and forgotten. See what does a bookkeeper actually do each month.
Catch-up bookkeeping is the work of bringing a set of books that has fallen behind back to current, typically covering unreconciled bank accounts, uncoded transactions, missing source documents and unlodged activity statements. It is a project with a defined endpoint rather than an ongoing service, and it is scoped separately from a monthly engagement because the volume and the condition of the file determine the effort. Catch-up almost always uncovers something: unrecorded liabilities, GST errors that need revision, or superannuation that was never paid. See catch-up bookkeeping cost guide.
A chart of accounts is the structured list of accounts your business uses to record transactions, grouped into assets, liabilities, equity, income and expenses. It determines what your reporting can tell you. Too few accounts and everything collapses into "general expenses"; too many and coding becomes inconsistent because nobody can remember which one to use. A well-built chart reflects how the business actually makes money, separating direct costs from overheads so gross margin means something. Restructuring it later is possible but tedious, so it is worth getting close to right at the start. See chart of accounts.
A credit note is a document issued to a customer that reduces the amount they owe, used for returns, cancellations, billing errors, agreed discounts or disputed charges. For GST purposes it is an adjustment note, and it reverses the GST originally reported on the sale. Credit notes must be recorded against the original invoice rather than as a negative sale, or your revenue and your debtor ledger both drift. Businesses that issue credits informally, by simply not chasing an invoice, end up with a receivables balance full of amounts that will never be collected. See what is a credit note.
Depreciation is the accounting method that spreads the cost of a fixed asset over its useful life, recognising a portion as an expense each period rather than all of it at purchase. It matches the cost to the periods that benefit from the asset. Accounting depreciation and tax depreciation are calculated differently and often produce different numbers for the same asset, which is why your tax return and your management accounts can legitimately disagree. Where an immediate write-off measure applies for tax, the asset is still depreciated in your accounts. See instant asset write-off 2026-27.
Double-entry bookkeeping is the system in which every transaction is recorded in at least two accounts, with total debits equal to total credits. Buying a laptop with cash increases an asset and decreases another asset; raising an invoice increases revenue and increases receivables. The discipline is what makes a balance sheet balance and what allows errors to be found, because an out-of-balance ledger signals that something is wrong. Accounting software applies the mechanics automatically, which means the risk has shifted from arithmetic errors to coding errors. See understanding double-entry bookkeeping.
A fixed asset register is the record of the physical and intangible assets your business owns, showing for each one the purchase date, cost, depreciation method, accumulated depreciation, written down value and disposal details. It supports the fixed asset balance on your balance sheet and provides the detail your tax agent needs at year end. Registers that are not maintained accumulate assets that have been scrapped, sold or lost, which overstates the balance sheet and understates the loss on disposal that should have been recognised. See month-end close process for Australian SMEs.
A journal entry is a manual accounting entry used to record transactions that do not flow through a bank feed, invoice or bill, such as accruals, depreciation, payroll allocations, intercompany transfers and corrections. Journals are necessary and also the easiest place for errors to hide, because they bypass the checks built into transactional processing. Good practice is a description that explains why, supporting documentation attached, and review by someone other than the preparer for anything material. Unexplained journals are the first thing an auditor or a buyer's due diligence team looks for. See internal controls for small business.
A prepayment is an amount paid in advance for goods or services to be received in a future period, recorded as an asset and released to expense over the periods it covers. Annual insurance, software subscriptions and rent paid in advance are the common examples. Without prepayment treatment, a single annual payment lands entirely in one month, making that month look unprofitable and every other month look better than it was. For businesses with several annual renewals, prepayments are often the difference between reporting that reflects trading and reporting that reflects payment timing. See month-end close process for Australian SMEs.
An audit and a review are two different levels of assurance an external accountant can provide over financial statements. An audit is the higher level: the auditor gathers sufficient evidence to express an opinion that the financial statements are free from material misstatement. A review is limited assurance, based mainly on enquiry and analytical procedures, concluding that nothing has come to the auditor's attention suggesting the statements are materially misstated. A review costs less and delivers less. Which one you need is usually determined by legislation, a funding agreement or a constitution rather than by choice. See does your company need an audit.
These three terms describe different things, and only two of them mean anything legally. A registered BAS agent is registered with the Tax Practitioners Board and may provide BAS services for a fee, covering GST, PAYG, superannuation guarantee and activity statement lodgement. A registered tax agent is also TPB registered and may additionally provide tax agent services, including income tax returns and income tax advice. "Accountant" is not a protected title on its own, so it tells you nothing about registration or qualification. A person may hold a CA or CPA qualification and no registration, or a registration and no membership. Always check the TPB public register before engaging someone to lodge on your behalf. Scale Suite is a registered BAS Agent, registration 26298194, and a member of Chartered Accountants Australia and New Zealand. We are not a registered tax agent: income tax returns and structuring are provided by an independent partner firm that contracts directly with the client. See BAS agent services.
A board pack is the set of documents provided to directors before a board meeting, typically including financial performance with commentary, the cash and funding position, key operating metrics, and the decisions being put to the board. Its job is different from management reporting: it should allow a director to understand what happened and decide what to do, without reconstructing the analysis themselves. The most common failure is a pack containing numbers but no interpretation, which pushes analysis into the meeting and leaves less time for decisions. See board and investor reporting.
Budget versus actual is the comparison of what a business planned to earn and spend against what it actually earned and spent, with the difference shown as a variance. The comparison is where a budget earns its value: without it, the budget is a document nobody is accountable to. Useful variance analysis explains cause rather than reporting size, distinguishing timing differences that will reverse from structural changes that will not, and separating volume effects from price effects. It also works best when the same comparison appears every month rather than at year end. See budget versus actual variance analysis.
A financial controller is the senior finance role responsible for the accuracy and integrity of a business's financial records and reporting. The controller owns the month-end close, the reporting process, the control environment and compliance, and usually manages the bookkeeping and accounts team. The distinction from a CFO is that a controller is accountable for what has happened being recorded correctly, while a CFO is accountable for what should happen next: capital, strategy, pricing and investment. Businesses often hire a CFO when what they need first is a controller. See what does a financial controller cost in Australia.
An outsourced finance team, sometimes called an embedded finance function, is a provider that owns the monthly finance outcome rather than selling hours or a single seat: bookkeeping, payroll, BAS lodgement, reporting and senior review under one fee. It is not the same as a bookkeeper, a fractional CFO working on top of someone else's ledger, or an offshore hire you still have to manage. Typical complete functions for Australian SMEs run $2,500 to $6,000 a month. See finance services and how much an outsourced finance team costs in Australia.
A fractional CFO is an experienced chief financial officer engaged on a part-time or ongoing basis rather than as a full-time employee, giving a business access to senior financial judgement without the cost of the full-time role. The work typically covers cashflow and funding strategy, pricing and margin, budgeting and forecasting, board and investor reporting, and preparation for a raise or a sale. It suits businesses whose decisions have outgrown their bookkeeping but whose scale does not yet justify a permanent CFO salary. See the complete guide to fractional CFO costs in Australia.
A key performance indicator is a measure chosen to track progress against a specific objective. In finance the useful ones connect to decisions: gross margin by service line, debtor days, revenue per employee, utilisation, customer concentration. The common failure is tracking too many, which produces a dashboard nobody reads, or tracking measures that describe activity rather than outcome. A small set, reported consistently with a target and a trend, beats a comprehensive set reported once. See key financial KPIs for Australian SMEs.
Management accounts are internal financial reports prepared regularly, usually monthly, to inform decisions inside the business. They typically include a profit and loss with comparison to budget and prior period, a balance sheet, a cash position, and commentary explaining what moved and why. They differ from statutory accounts in purpose, timing and format: management accounts are for operating the business during the year, statutory accounts are for reporting on it after the year has ended. Managing on statutory accounts alone means acting on information that is up to twelve months old. See management accounts explained.
Month-end close is the defined process of finalising a period's financial records so that reporting can be produced from them. It includes reconciling bank, credit card and clearing accounts, raising accruals and prepayments, recording depreciation, agreeing intercompany balances, reconciling payroll and GST to the ledger, and reviewing the balance sheet before release. A close should have a checklist, an owner and a target day count. Where it exists only in one person's knowledge, it leaves the business when they do. See month-end close process for Australian SMEs.
Statutory accounts are the annual financial statements a company prepares to meet its legal and tax obligations, generally comprising a profit and loss statement, balance sheet, statement of cash flows and notes, prepared in accordance with applicable accounting standards. They are produced after year end, follow a prescribed format, and are used for the income tax return and, where required, for lodgement with ASIC. They are not designed to help you run the business during the year, which is what management accounts are for. See management accounts explained.
A 13-week cashflow forecast is a rolling projection of cash receipts and payments week by week over the coming quarter, updated each week against actual results. Thirteen weeks is the standard horizon because it covers a full quarter including a BAS cycle while keeping the assumptions close enough to reality to be credible. The value comes from the weekly update rather than the initial model: comparing last week's forecast to what actually happened is what exposes which assumptions are wrong. See cash flow forecasting for Australian SMEs.
The break-even point is the level of sales at which total revenue equals total costs, so the business makes neither a profit nor a loss. It is calculated by dividing fixed costs by the contribution margin per unit or by the contribution margin ratio for revenue-based businesses. Knowing it turns abstract cost discussions into concrete ones: it tells you how much revenue a new fixed cost, such as a hire or a lease, requires to justify itself. It also tells you how far revenue can fall before the business is losing money. See break-even point calculator.
Burn rate is the speed at which a business consumes its cash reserves, usually expressed as a monthly figure. Gross burn is total cash spent per month; net burn is spending less receipts, which is the number that matters for survival. It is most commonly used by early-stage and growth businesses operating at a loss, but it applies to any business drawing down cash, including a profitable one funding working capital growth. Burn rate paired with the cash balance produces runway. See how many months of cash runway does your business have.
The cash conversion cycle measures how long cash is tied up in operations, calculated as inventory days plus debtor days minus creditor days. A shorter cycle means cash returns to the business faster and less external funding is needed to support growth. A business with a long cycle can be profitable and still run out of money as it grows, because each new sale consumes cash before it produces any. The three components are also three separate levers: stock holding, collection speed and supplier terms. See cash conversion cycle explained for Australian SMEs.
Contribution margin is revenue less variable costs, representing the amount each sale contributes toward fixed costs and profit. It can be expressed per unit, per job or as a percentage of revenue. It is the number that answers whether taking on a particular job at a particular price is worth doing, and it underlies break-even analysis. Businesses that price against gross margin without separating fixed from variable costs frequently accept work that covers its direct costs but contributes nothing meaningful to overheads. See contribution margin explained.
Creditor days measures the average time a business takes to pay its suppliers, calculated as accounts payable divided by cost of sales, multiplied by the number of days in the period. Extending creditor days improves cash position, but only up to the point where it damages supplier relationships, forfeits early payment discounts or affects your priority when supply is constrained. It is one of the three components of the cash conversion cycle and the one most directly under your own control. See paying suppliers on time.
Debtor days measures the average time customers take to pay, calculated as accounts receivable divided by revenue, multiplied by the number of days in the period. It is the single most useful cash metric for most service businesses, because reducing it releases cash without changing revenue or costs. Benchmarks vary widely by industry, so comparing against the wrong reference produces the wrong conclusion. Tracking the trend in your own business matters more than the absolute number. See debtor days benchmarks by industry in Australia.
EBITDA is earnings before interest, tax, depreciation and amortisation. It is used as an approximation of operating performance because it strips out financing decisions, tax position and non-cash accounting charges, which makes it easier to compare businesses with different capital structures. It is also the metric most commonly used as the basis for business valuation multiples. Its weakness is that it ignores real costs: a business with significant capital replacement requirements has genuine depreciation, and treating EBITDA as cash flow overstates what is available. See what investors and buyers actually look at in your books.
Gross margin is revenue less cost of goods sold or direct costs, expressed as a dollar amount or as a percentage of revenue. It measures the profitability of what you sell before overheads, and it is the number most sensitive to pricing, input costs and delivery efficiency. Its usefulness depends entirely on the chart of accounts: if direct costs and overheads are mixed together, gross margin means nothing. Tracking it by service line, product or job is usually more revealing than tracking it in total. See what is a good gross profit margin.
Gross margin and markup describe the same relationship from opposite directions, and confusing them is a common and expensive pricing error. Markup is the amount added to cost, expressed as a percentage of cost. Margin is the profit, expressed as a percentage of the selling price. A 50 per cent markup on a $100 cost gives a $150 price and a 33 per cent margin, not a 50 per cent margin. Businesses that set prices using markup and budget using margin routinely find their actual profitability lower than planned. See business pricing strategy guide.
Runway is the length of time a business can continue operating before it runs out of cash, calculated as the current cash balance divided by net monthly burn. It is usually expressed in months. Runway is the number that determines the urgency of every other decision, because it sets how long you have to fix a problem, raise capital or reduce costs. A runway calculation based on average burn understates risk where spending is lumpy, so a weekly forecast is a better guide than a single figure. See when will I run out of money.
Work in progress is the value of work done on a job that has not yet been fully invoiced, used to recognise revenue as a contract progresses rather than only when a claim is raised. In construction, a P&L is only as honest as the WIP schedule. Under-claimed jobs hide profit. Over-claimed jobs manufacture profit that reverses at completion. Banks and sureties ask for the WIP first. See construction finance.
A progress claim is an invoice raised against a construction or project contract for work completed to a date, usually monthly. Claim timing rules cashflow: a claim submitted a few days late on a monthly cycle can push a large receipt into the following month. Variations done but not claimed are the quiet leak. See construction finance.
Retention is a portion of a progress claim, commonly five to ten per cent, held back until practical completion or the end of a defects period. On a large book of work it is a material receivable that sits outside the bank account and is easy to forget to invoice when it falls due. A retention register with release dates is the control. See construction finance.
Working capital is current assets less current liabilities, representing the short-term resources available to fund day-to-day operations. In practice it is mostly receivables plus inventory less payables. Growth consumes working capital, which is why a growing, profitable business can be short of cash: each new customer requires you to fund delivery before you are paid. Managing it means managing the three levers of collection speed, stock holding and supplier terms rather than waiting for the bank balance to signal a problem. See working capital for SMEs.
An Australian business number is an eleven-digit identifier issued by the Australian Business Register to entities carrying on an enterprise in Australia. It is used on invoices, in dealings with the ATO and other government agencies, and to register for GST and other tax roles. Where a supplier does not quote an ABN, the payer may be required to withhold from the payment at the top rate under the no-ABN withholding rules. An ABN is not itself evidence of a business relationship: contractors quoting an ABN can still be employees in substance. See Australian business number.
An Australian company number is a nine-digit identifier issued by ASIC to a company on registration. It identifies the company as a legal entity, and it must appear on company documents such as invoices, receipts and public documents, though quoting the ABN is sufficient where the ABN incorporates the ACN. The distinction matters because a company has both, while sole traders, partnerships and trusts have an ABN and no ACN. See ABN versus ACN versus ARBN.
A discretionary trust, often called a family trust, is a structure in which a trustee holds assets for a defined class of beneficiaries and has discretion over how income and capital are distributed among them each year. It is widely used in Australia for asset protection and for flexibility in distributing income. The trustee's discretion must be exercised and documented before the end of the financial year, or default provisions in the trust deed apply, which can produce an unintended and expensive tax outcome. Distributions to minors and to corporate beneficiaries have specific tax consequences. This is registered tax agent territory. See trust versus company.
GST grouping is an optional ATO arrangement that treats related entities as a single entity for GST. Supplies between group members are generally disregarded and one member lodges for the group. It can reduce administration where entities transact heavily with each other, and it can complicate matters where entities have different GST profiles. It has tax consequences, so the decision belongs with a registered tax agent. See GST grouping for multi-entity businesses and multi-entity finance.
A holding company is a company whose main purpose is to own shares in, or assets used by, other companies rather than to trade itself. Groups use the structure to separate valuable assets, such as intellectual property or property, from trading risk, and to simplify ownership where several businesses share owners. The structure has consequences beyond asset protection: intercompany balances must be maintained on both sides, payroll tax grouping usually applies across the group, and GST grouping may be available. See holding company structures.
Pty Ltd stands for proprietary limited, the most common company structure in Australia. It is a separate legal entity from its owners, so the company itself contracts, owns assets and incurs liabilities, and shareholders' liability is generally limited to any unpaid amount on their shares. A proprietary company has restrictions on the number of shareholders and cannot raise funds from the general public. It must have at least one director who ordinarily resides in Australia, lodge an annual review with ASIC and pay the associated fee. Limited liability is not absolute: directors can be personally liable for unpaid PAYG withholding, GST and superannuation guarantee charge. See Pty Ltd in Australia explained.
A registered agent is a person or firm authorised to act on your behalf with a government body. In the tax system, registered BAS agents and registered tax agents are listed on the Tax Practitioners Board public register, and only they may provide the relevant services for a fee. ASIC maintains a separate register of agents authorised to lodge company documents. Registration matters practically as well as legally: registered tax and BAS agents access lodgement concessions that extend deadlines, and they carry professional indemnity insurance and code of conduct obligations that an unregistered provider does not. See what is a BAS agent.
If a term here describes something you are currently dealing with, we can help. Scale Suite runs embedded finance functions for Australian businesses, covering bookkeeping, payroll, BAS and IAS lodgement, reporting and cashflow. See our finance services or pricing.
About Scale Suite
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.
CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
Disclaimer:
This glossary is general information only and is not tax, legal or financial advice. Definitions describe the general Australian position and do not account for your circumstances. Rates, thresholds, penalty amounts and eligibility rules change, and several matters covered here are administered separately by each state and territory. Confirm the current position with the ATO, the Fair Work Ombudsman, ASIC or the relevant state revenue office before acting. Scale Suite is a registered BAS Agent (26298194) and a member of Chartered Accountants Australia and New Zealand. We are not a registered tax agent, and nothing in this glossary constitutes a tax agent service.
Sources:
Australian Taxation Office; Tax Practitioners Board; Fair Work Ombudsman; Australian Securities and Investments Commission; state and territory revenue offices.
