Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

E

Eligible service period (ESP)

The period of service and/or superannuation fund membership as it relates to an ETP. Where your ETP has been rolled over, your ESP includes the time you are invested in the rollover fund.

Eligible termination payment (ETP)

ETPs are lump sum payments from a superannuation fund, approved deposit fund, retirement savings account or ETP annuity, as well as some employer payments such as 'golden handshakes'. ETPs within the RBLs are taxed at the concessional rate.

Excess (Excessive) benefits

The part of any retirement benefit you receive that is over your RBL. An excess benefit received as a lump sum is taxed at the highest personal rate of income tax plus the Medicare levy. You are not entitled to the 15% tax offset on any income payments that arise from an excess benefit used to purchase a pension or ETP annuity.

Exempt income

Income you receive that is specifically exempt from taxation under the Tax Act. Examples include some Social Security pensions and allowances, Defence Force Reserve payments and scholarships.

F

Financial Institutions Duty (FID)

Following the introduction of the GST, this duty was abolished on 1 July 2001.

Franked dividends

A dividend that has a franking credit associated with it.

Franking credit

Franking or imputation credits represent the tax paid by a company on its profits before paying dividends to shareholders. Investors who receive dividends with franking credits are able to claim a tax offset, known as an imputation credit for the amount of the franking credit.

Fringe benefits

Non-cash remuneration paid by an employer to an employee. Fringe benefits may include things like motor vehicles, discounted loans, company shares or health insurance. Fringe benefits may be subject to Fringe Benefits Tax, at a rate of 48.5%. The gross taxable value of fringe benefits, known as 'reportable fringe benefits', is required to be reported on annual payment summaries each year.

Frozen cost base

Indexation is frozen as at 30 September 1999. so for any CGT event happening after that date the frozen indexed cost base is the index number for the September 1999 quarter divided by the index number in the quarter of purchase of the asset multiplied by the cost base of the asset.

G

Goods and Services Tax (GST)

A direct form of tax that is levied on the sale of some goods and provision of services.

H

There are no glossary terms available for this letter of the alphabet.

I

Imputation credit

Under the dividend imputation system, an investor in shares will earn a tax credit for dividends received from a company that has already paid Australian company tax. The tax credits (usually known as imputation credits) can be used to reduce the tax paid on these share dividends or as an offset against tax payable on other income.

From 1 July 2000, imputation credits over and above those you need to reduce your tax payable to zero, may be refunded to you or to your super fund by the Taxation Office.

Income splitting

A tax planning strategy, where investment or trust income is split between two or more people, with the result that less tax overall is paid on the income than if one person alone had earned the income.

Income stream investments

An umbrella term used to describe investments that provide regular payments, such as: allocated pensions, allocated annuities, lifetime pensions or annuities and fixed-term pensions and annuities.

Information Ratio

Measures the success of the investment decisions made by the Portfolio Manager that differ from the market index

J

There are no glossary terms available for this letter of the alphabet.

K

There are no glossary terms available for this letter of the alphabet.

L

Life expectancy

The number of years that, on average, people of a particular age are expected to live, based on statistical results from the Australian population. These statistics are published by the Australian Government in the Australian Life Tables.

M

Managed investment

An investment that allows individual investors to pool their funds with other investors in order to invest in a range of assets such as shares, fixed interest and property. Unit trusts, insurance bonds and friendly society bonds are all types of managed investments.

Marginal tax rate

The highest rate in the sliding scale of income tax rates applied to your taxable income in a particular tax year. For example, if you earn more than $62,500 in a year, your marginal rate is 47%. If you earn more than $21,600 then your marginal tax rate is 30%.

Market value

The amount that your investment would bring if you sold it. The market value of shares or units in a unit trust can be calculated by multiplying the number of shares or units held by the price at a particular time. The market value of other assets, such as property or collectables, may not be so easily worked out, and may only be accurately known once the asset is sold.

Medicare levy

A tax of 1.5% on your taxable income, used to fund Australia's Medicare system. High-income earners who do not have private health cover may have to pay a higher rate. Low-income earners and some Senior Australians may be exempt from the Medicare levy, or eligible for a lower rate. The Medicare levy cannot be offset directly by tax offsets or credits.

N

Negative gearing

Negative gearing occurs where you have borrowed money for investment purposes, and the income you earn from your investment is less than the interest you pay on your loan. An investment may also be positively geared, where your investment income is greater than your loan interest, or neutrally geared, where the two are equal.

O

There are no glossary terms available for this letter of the alphabet.

P

Payment summary

Replaces Group Certificates and provides details of payments made during the year.

PAYG

Pay As You Go is used to describe the process by which tax is deducted from your salary, wages and pension and annuity income. Each time you are paid income of this type, tax is deducted from your income by the payer and remitted to the Tax Office.

The PAYG system also replaced the provisional tax system from 1 July 2000. The PAYG system will generally apply to those people who paid tax under the provisional tax system.

Pension

A regular periodic payment to a person from a superannuation fund. The person invests or accumulates a lump sum in the super fund, and receives income payments in return.

Preservation / preserved

Generally, this means having to keep your money in the superannuation system until you have reached age 65, or have permanently retired after preservation age.

Preservation age

Preservation age depends upon your date of birth, as follows:

Date of birth	Preservation age
before 1 July 1960	55
1 July 1960 - 30 June 1961	56
1 July 1961 - 30 June 1962	57
1 July 1962 - 30 June 1963	58
1 July 1963 - 30 June 1964	59
after 30 June 1964	60

Property trust

A type of unit trust that invests solely in property or property securities. The types of property in which a property trust invests include commercial and industrial premises, offices, hotels and shopping centres. A property trust may be "listed", which means that its units are listed and traded on the stock exchange, or "unlisted", which means that units are purchased and redeemed directly from the property trust manager.

Provisional tax

See: PAYG.

Purchase price

The lump sum you use to buy an income stream. It can be either ordinary savings or an ETP.

Q

There are no glossary terms available for this letter of the alphabet.

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