Accounting 101: Key Concepts For Small Business Owners

Every small business owner runs into the same handful of accounting and tax terms sooner or later, often in a letter from the ATO or a question from a bookkeeper. This glossary sets out nine of the most common ones in plain English, each with a primary source you can check for the current detail. Bookmark it and come back whenever a term trips you up.

ABN vs ACN

An Australian Business Number (ABN) is an 11-digit number the Australian Business Register, run by the ATO, issues to any entity carrying on a business: sole traders, partnerships, trusts and companies. An Australian Company Number (ACN) is a separate nine-digit number that ASIC allocates only when a company registers under the Corporations Act. If you trade through a company you need both: the ACN identifies the company as a legal entity, and the ABN lets it trade, invoice and deal with the ATO. Sole traders and partnerships need an ABN but never have an ACN.

Accrual vs Cash Accounting

Cash accounting records income and expenses when the money actually moves; accrual accounting records them when they're earned or incurred, even before cash changes hands. Which one suits you depends on how your business gets paid and how large it is. business.gov.au has a short comparison to help you choose, and our guide to Australian accounting practices covers the trade-offs in more depth.

BAS (Business Activity Statement)

A Business Activity Statement is the single form GST-registered businesses use to report and pay several obligations at once, most often GST, PAYG withholding and PAYG instalments. How often you lodge depends on your GST turnover: monthly once you reach $20 million, quarterly below that, or annually if you're voluntarily registered with turnover under $75,000. You must lodge by the due date even if you have nothing to report for the period.

Depreciation

Depreciation is the decline in value of an asset, such as a vehicle, machine or piece of technology, over the time your business uses it. The ATO's rules let you claim a deduction for a depreciating asset's decline in value each year over its effective life, using either the prime cost or diminishing value method. Some assets can instead be written off immediately under small business depreciation concessions, so check the current threshold with your adviser before you buy.

Fringe Benefits Tax (FBT)

Fringe benefits tax is a tax employers pay on certain non-cash benefits provided to employees or their families, such as private use of a work vehicle. It's separate from income tax: the employer pays FBT, not the employee, calculated on the grossed-up taxable value of the benefit at a rate of 47%. The FBT year runs from 1 April to 31 March, not the usual financial year.

GST (Goods and Services Tax)

GST is a 10% tax added to most goods and services sold in Australia. You must register once your GST turnover reaches, or you expect it to reach, $75,000 a year ($150,000 for non-profits), within 21 days of crossing the threshold. Below that, registration is optional. Once registered, you charge GST on sales, claim credits for GST on purchases, and report the net amount on your BAS.

PAYG Instalments

Pay as you go instalments are regular prepayments toward the income tax you expect to owe on your own business and investment income. Individuals and sole traders generally enter the system once instalment income reaches $4,000 and tax payable reaches $1,000; companies enter at $2 million of instalment income. What you pay through the year is offset against your tax bill when you lodge your return, leaving little or nothing left to pay at tax time.

PAYG Withholding

Pay as you go withholding is tax you take out of payments to employees, directors and some contractors and pay to the ATO on their behalf. It's reported and paid through your BAS, and getting it wrong can cost you the deduction for that payment as well as penalties. It's easy to confuse with PAYG instalments above: withholding applies to money you pay to others, instalments apply to tax you owe yourself.

Superannuation Guarantee

The superannuation guarantee is the minimum super you must pay eligible employees, currently 12% of their ordinary time earnings, the final scheduled rate increase under current law. Since 1 July 2026, payday super requires you to pay it into an employee's fund each payday, generally within seven business days, rather than the old quarterly cycle.

Every term above has its own detail worth getting right for your specific business, and the rules shift often enough that it's worth checking the current figures before you rely on them. If you want help applying any of this to your business, Finance & Tax Consultants' accounting and bookkeeping team can walk through it with you.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.