Account Based Pension
The new name for Allocated Pensions. What is an Allocated Pension? The old name for an Account Based Pension. Either way it is the money that is regularly paid to you from your superannuation when you retire. Once you retire you turn on the 'tap' in your super fund and you withdraw what you like, subject to a minimum, until it runs out. For those over 60 these pensions have been tax free since July 2007. The Age Pension is completely different but everyone seems to use the word 'pension' to describe both.
Adjusted taxable income (ATI)
Taxable income plus other bits of income and losses. It is used to work out eligibility for government benefits and tax offsets. Included in your ATI, for example, are reportable employer super contributions and net rental losses. It can seem as clear as mud so our suggestion is to read the ATO's explanation .
Age Pension
A Centrelink benefit that is paid to those who have reached their Centrelink defined pension age and meet the conditions of an assets test and an income test. If you are old enough and pass both tests you get the Age Pension. You can have an Age Pension and Account Based Pension paid to you at the same time. If you aren't eligible for an Age Pension you may still get access to the Commonwealth Seniors Health Card.
All Ordinaries Index
The 'All Ords' is an index measuring the share prices of the largest 500 or so companies listed on the Australian Stock Exchange. The All Ords measures the overall performance at a set point in time. You will normally see the All Ords reported in the news each night as it shows the movement of the market for the day. "The All Ords closed higher today...". Other countries have their own indices such as the Dow Jones in the US and the FTSE in the UK.
Assessable income
Income is income right? Wrong. We have taxable income, adjusted taxable income and assessable income. Think of assessable income as a big net that catches everything you earn - salary, dividends, rent, interest, proceeds from your lemonade stall and so on. There are a few more that are not really income but are included too. Read the ATO's description here. Assessable income is before any deductions are allowed. It is kind of the full monty when talking about your income for the financial year.
Something you own. It may be financial like cash, shares or super. It may be physical like a house, car or iPad. It may be fabulous like World Cup tickets or a diamond dog collar for Fifi. Because this is a financial website we will keep our asset thinking to financial assets but we would like to hear more about the World Cup tickets.....
Asset Allocation
Ok diamond dog collars aside (see Asset) an asset allocation is the way your investment is divided across the major asset classes. An asset class is a group of assets eg Australian shares. Your asset allocation will give your exposure to each asset class. An example of a balanced asset allocation is 15% cash, 25% fixed interest, 30% Australian shares, 10% property and 20% international shares.
Asset Class
A group of financial assets. Traditionally there have been five major asset classes - cash, fixed interest, Australian shares, property and international shares. If we want to be a bit more hip and modern we would add our newest asset class - alternatives - to this group. Alternatives are a neat way of saying 'other assets that don't fit anywhere else' and can include infrastructure or venture capital.
At Call
Money that can be withdrawn from an account when it is needed. Examples are everyday bank accounts or cash management trusts. A Term Deposit is not at call as the money is locked away for a defined period. "Give me my money. No not for another 30 days".


Balanced Fund
‘Balanced’ refers to the 'flavour' of your investment. The fund is balanced in investing across all the asset classes to achieve a medium to long term income and capital growth return. Your choice of ‘flavour’ is determined by your investment goals, time frame and attitude to risk.
A legal proceeding for individuals or businesses that are unable to repay their debt obligations. A trustee is appointed to administer the bankruptcy. Bankruptcy has serious consequences including a public life record, inability to access credit for seven years, disclosure to future employers and restrictions on overseas travel. There are some alternative options available prior to becoming bankrupt. See the Australian Government website.
Bear Market
When share prices are falling the market is said to be in a bear market. A bear is said to 'claw' the prices down. Grrrr.
A person who will receive a benefit or asset upon the death of the owner of the asset. In superannuation terms the beneficiary is typically the member's spouse or dependents.
Binding Death Nomination
An instruction to the trustee of your superannuation fund to pay your super to your nominated beneficiary in the event of your death. The exception is unless it would be unlawful to do so. Binding Death Nominations typically last for three years and must be witnessed. They provide certainty and control over who your super goes to when you are pushing up daisies.
Bull Market
When share prices are rising the share market is said to be in a bull market. Think of a bull 'tossing' the prices up. Hooray!


Capital Gain or Capital Growth
The difference between what you paid for an asset (including buying costs) and what you got when you sold it (less the selling costs). If you happen to own Elvis' white jumpsuit you are likely to make a pretty heft capital gain when you sell it.
Capital Gains Tax
This is the tax payable on the profit you make from selling a capital asset. So congrats if you have just sold Elvis's jump suit (see Capital Gain) but just wait until your capital gains tax bill comes in.
Cash Advance
Cash withdrawn from a credit card. Beware! A transaction fee is usually charged and interest is calculated on the withdrawal immediately until it is paid back. The average credit card interest rate is between 15 and 20% so it is effectively like a high interest loan.
Cash Investment
See Cash Management Trust. Money invested in a short term, interest paying investment. A bank account is a simple example of a cash investment. A fancy example is a promissory note. Throw that out there at your next BBQ.
Cash Management Account (CMA)
A Cash Management Account is a bank account with typical banking facilities such as a debit card or cheque book. As it is a bank account and not an investment fund (see CMT) the returns are based on money market returns and typically would be slightly lower than a CMT.
Cash Management Trust (CMT)
A type of management fund investment where the assets are invested in cash securities. Examples are government securities, promissory notes and bills of exchange. CMTs typically pay a higher interest rate than a traditional bank account due to the underlying assets being invested rather than held on account. CMTs can be suitable for investing cash for the short term such as saving for a holiday in 12 months time.
A payment made by the government to your super fund if you make a personal super contribution and meet certain conditions. To be eligible you need to earn less than $34,488 (2014/15 year), pop $1000 into super for the government to put in $500. You are ineligible if you earn over $49,488. If you are in between you will get a bit. These are based on the 2014/15 financial year rates.
Sounds grown up. It means property or assets you put up for security for a loan. It can also mean a person having the same ancestor as someone else. Don't mix the two.
Comparison Rate
A rate that helps you work out the true cost of a loan. It includes the interest rate and most fees and charges all converted back to a single percentage figure. Don't be impressed by the fancy headlines you want to know what the comparison rate is for the real deal.
Compound interest
According to Albert Einstein (Heard of him? He was an old smart guy.) compound interest is the eighth wonder of the world. In essence it is interest on interest. If you invest $100 and it earns 10% interest you have $110. This amount is 'compounded' when the 10% interest is now calculated on the total amount ($110) and becomes $121. If we do this again it is $133.
Concessional Contributions (CC)
A type of contribution made to super. CC's are full of their own importance as they like to be known by different names. AKA pre tax or salary sacrifice contributions. Employer contributions are also counted as CCs. CCs are taxed at 15% when they go into super and there is a limit on how many CCs you can throw into super, known as a Concessional Contributions Cap. Not hat, visor or beret. Just cap.
Concessional Contributions Cap
A limit on the amount of concessional contributions that can go into super. For the 2014/15 financial year the limit is $30,000. If you are over 50 you have a higher cap of $35,000 for the same financial year. If you exceed your contributions cap you will enjoy a total penalty tax of 46.5% and it will be counted towards your non concessional cap limit.
Condition of Release
Relates to super. A condition of release is being able to tick a box to say you have met a certain status and can therefore access your super. Examples are retiring or reaching age 65. This is only half of the equation as you also have to be old enough which is called your preservation age. Sorry to everyone out there who were racing to retire at 25 and access their super. You'd better read the section on preservation age first.
Consumer Price Index (CPI)
Is a quarterly measure of inflation. What the average consumer spends on goods and services such as housing, clothing, health, alcohol, transport and so on is represented by a basket of goods. If the cost of the stuff in the basket goes up inflation is said to have risen. If the cost of the stuff goes down inflation has decreased. Normally the basket is a bit of a mix, say transport has increased but the cost of clothes is cheaper so it gives an overall picture. It makes the Reserve Bank of Australia (RBA) happy if inflation hangs around the target range of 2 to 3% a year.
Money paid into super is called a contribution. There are three types of contributions. First are employer, or Super Guarantee Contributions (SGC) which is the amount work has to put into your super. This is currently 9.25% of your annual salary. Second are pre tax or salary sacrifice contributions. Third are post tax or personal contributions. You need to be aware of the contribution limits when putting money into super. Contributions are strange creatures as they like to be known by different names. When in the mood pre tax contributions are also called Concessional Contributions and post tax contributions are also called Non Concessional contributions.
Contributions tax
A 15% tax that is applied on all concessional contributions. This includes employer, pre tax or salary sacrifice contributions. High income earners (over $300,000) pay an additional 15% contributions tax on top of this.
Credit Contract
A document that contains the details of a loan, including the term, interest rate, fees and charges and repayments. It you are borrowing money you will receive a credit contract. Legally credit providers must provide this to you.
Credit File
A file kept by a credit reporting agency that shows your credit history. Lots of information is recorded on your credit file such as where you have lived, where you have worked, if you owe any money and so on. Lenders will access your credit file to decide if they want to lend money to you. If you have any defaults such as outstanding doctors bill this will be listed on your credit file and is a black mark against you. Every time you apply for credit, be it a mobile phone, credit card or an interest free deal this will be recorded on your credit file. You can get a copy of your credit file for free. Visit
Credit Guide
You must be provided with a Credit Guide by anyone engaging in certain credit activities with you (eg home loan). The Credit Guide contains information about the lender, their licence number, how they get paid, who they deal with and a dispute resolution process.
Credit Rating
An assessment of the credit-worthiness of individuals and corporations, based on their borrowing and repayment history. For example they have checked Jane Spendalot’s credit file and found she had applied for five credit cards last month, never paid her mobile phone bills and had changed job twenty times in the last year. Their credit rating assessment of her is unlikely to be favourable.


Death Benefit
A payment made from a super fund to a beneficiary when you die. This can be your super balance or insurance you hold in super.
Debt Agreement
A legal agreement for the repayment of unpaid debts that is less formal and not as severe as filing for bankruptcy. The agreement is between you and those you owe money to and allows you to pay back the debts over an extended time period at an amount you can afford. Using a Debt Agreement avoids the harsher penalties of bankruptcy.
Debt Investment
Money invested in a cash and fixed interest investment. You lend money to an organisation in exchange for interest payments. The company you lent to is now indebted to you. A government bond is a simple example of a debt investment. A fancy example is a debenture. Always a good 'impress everyone at the BBQ' word.
Deductible expenses
Expenses that can be deducted from your assessable income for tax purposes. Doing this typically reduces the amount of tax you have to pay. There are rules as to what is and is not a deductible expense. Generally backpacking with your mates around South America is not a deductible expense.
Default investment option
Relates to your super. Unless you choose an investment option yourself your super fund will invest your super in the default investment option.
Defensive asset
An investment that has a reduced exposure to risk, and therefore the expectation for a lower rate of return. An example is investing mainly in cash investments.
Disability Insurance
Is further classified as temporary or permanent. Temporary disability insurance is known as income protection. Permanent disability insurance is known as Total and Permanent Disability (TPD) insurance. Both types are used to protect against unexpected injury or illness. The insurance can be used to replace salary, repay a mortgage and/or pay for medical costs.
Income paid from a managed investment. The distribution is made up of income and capital gains earned by the managed fund you invested in and is and passed back to you, the investor.
Spreading investment across the asset classes reduces risk. It is the 'don't put all your eggs in one basket' analogy.
Investing in a listed company makes you a shareholder of that company. As a return for your investment you can receive a dividend payment. This is a payment of the share of the profits of the company back to you, the shareholder. The more shares you own the more dividends you can receive. A franked dividend means the company had already paid tax on the profits before it made the dividend payment to you. See Franked Dividend.
Dollar cost averaging
Is investing a set amount of money regularly over a period of time. For example investing $300 each month for two years. There is an advantage in investing this way as more is bought when the price is low and less is bought when the price is high which results in a lower average cost and reduces the risk of loss.


Effective interest rate
An annual interest rate that takes into account the effect of compound interest. It is the nominal interest rate with compound interest payable included.
Enduring Power of Attorney
Like an ordinary Power of Attorney (PoA), an enduring power of attorney gives your nominated person authority to make a defined range of decisions for you. The enduring PoA is more comprehensive then the PoA as it remains in place if you become mentally incapacitated down the track.
The value of an asset less any money owing on it. If you own a house or a portfolio of shares you will have a certain dollar value of equity in these assets.
Equity Investment
Money invested in a company or property with the expectation of receiving income and capital gain returns. Equity investment is normally for a longer time period of five or more years. A simple example is buying shares. A fancy example is a warrant. Not the 80s band that sang Sweet Cherry Pie.


Financial Plan
A plan created by a financial planner that outlines your financial goals and the strategies to achieve these goals based on your circumstances. Think of it as your blue print to achieve your financial goals. Also known as a Statement of Advice (SOA).
Financial Services Guide (FSG)
A guide that contains information about the company providing you with financial advice. It explains the services offered, fees charged and a dispute resolution process.
First Home Owner's Grant (FHOG)
A state government grant to first home buyers, to offset the effect of the GST on buying or building a home. The FHOG can create a fog for new buyers as it operates differently in each state. Wade through by checking the Government's website here. (First Home Owner's Grant)
Fixed interest investment
An investment where you lend money to a government or semi-government body, a company or a fund in return for a fixed rate of interest. The investment can be held until maturity or traded beforehand. A simple example is a term deposit. A fancy example is a debenture.
Fixed interest rate
Interest is paid at a fixed rate over the term of a loan or investment. A fixed interest rate on your home loan, for example, means you have to pay $3,000 a month for 3 years. You cannot vary the fixed amount (unless you want to pay high penalty fees to do so). It gives certainty over your payments however the trade off is a less favourable interest rate than an unfixed, or variable rate.
Fixed rate home loan
Allows you to lock in an interest rate on your home loan for a set period of time, normally between 1 and 5 years. A fixed rate provides certainty over your payments and protects against interest rate rises. However it also means you do not benefit from falling interest rates and you cannot vary the payments (unless you pay high penalty fees).
Franked dividend
A dividend is a payment by a company to the shareholder. A franked dividend is a dividend on which the company has already paid tax. Shareholders are entitled to a tax credit for the amount of tax the company has already paid. This credit is known as a franking credit or imputation credit. Shares can be fully franked or partially franked.
Franking credit
A franking credit is your share of tax that a company has already paid on the profits you received as a dividend payment. As the company has already paid tax on these profits you receive a tax credit for it. This system is used to avoid double taxation. Also known as imputation credits.
Fund Manager
A company responsible for investing money on behalf of investors. Investors pool their money together, called a managed fund, and the fund manager invests it with the aim of delivering specified returns. The fund manager will invest the money in different ways depending on the 'flavour' of the managed fund. For example Australia shares or property trusts.


Borrowing money to invest is called gearing. Investors can gear into an investment property or a share portfolio. Gearing amplifies the risk and the return of the investment. There can be tax advantages of gearing.
Growth asset
An investment in assets that can deliver both an income and growth return over time. Income can be in the form of rental payments or dividends and growth is the increase in value of the asset. Examples of growth assets are property and shares. Growth assets have a higher risk exposure with a higher return potential.
Growth fund
Refers to the 'flavour' of your superannuation or managed fund investment. The money is invested predominantly in growth assets, such as property or shares, to achieve a medium to long term capital growth return. Your choice of flavour is determined by your investment goals, time frame and attitude to risk.


Imputation credit
An imputation credit is your share of tax that a company has already paid on the profits you received as a dividend payment. As the company has already paid tax on these profits you receive a tax credit for it. This system is used to avoid double taxation. Also known as franking credits.
Income protection insurance
Protects your salary. If you are sick or injured and can't work 75% of your salary is paid until you can return to work, or for the length of your policy. It can also be held inside of superannuation and is known as salary continuance when it is.
Measures the change in value of a market or a section of a market. For example the Australian All Ords Index measures the change in the value of shares listed on the market.
The increase in the cost of goods and services over time. Remember when your parents use to tell you that milk cost 20 cents? And you yawn in anticipation of a long story....that is inflation.
Payment for the use of money over time. You earn interest by lending your money. If you borrow money, interest is the amount you pay to borrow the money. The rate of interest can be fixed or variable. It is usually calculated as a percentage of the amount lent or borrowed. For example on a $20,000 car loan with an interest rate of 10% you would pay interest of $2,000 in the first year.
Interest free deal
Allows you to buy goods or services now and pay for them later. A certain furniture store with loud ads springs to mind. The interest free period is for a set amount of time. You normally need to make regular repayments during the interest free period. When it ends the outstanding balance is charged at very high interest rates, up to 30%. Read the fine print before signing up for an interest free deal.
Interest free period on credit cards
The days where you don’t have to pay interest on your credit card purchases. The interest free period usually starts on the first day of your billing cycle, not when you make a purchase. Check your credit card statement so you know when you are within the interest free period. It is worth working this out given that the average interest rate on credit cards is normally 18%.
Interest only home loan
Where only the interest is paid on a home loan for a specified period. This means that principal repayments are not made during this time. To repay a home loan in full both the principal (the original amount you borrowed) and the interest (the cost of borrowing) need to be repaid.
Interest rate
The relationship between the amount of money borrowed or lent and the money paid in return for the use of that money. Usually expressed as a percentage per year.
Dying without a will. Your Will provides written instructions on your death. Without these instructions your assets will be distributed according to intestacy laws in your state.
Investment choice
Making a conscious decision about how your money will be invested. This is done in conjunction with determining your risk profile,your investment strategy and your time horizon(the period you are looking to invest).
Investment platform
An administrative system for your investments. Platforms offer a range of investments and services, all in the one place. Reporting for all investments is usually in the one report.
Investment strategy
The long term plan for how you want to invest your money. The strategy is formulated according to your personal situation, risk profile and your goals and objectives and time horizon.
Investor Risk Profile
A person's willingness to trade off the risk of losing money in exchange for receiving higher returns over time. Your risk profile will depend on your personal situation, investment experience, time frame and your attitude to risk. Establishing your risk profile is an important step done with your financial planner prior to investing.


Joint tenants
When property is held by two or more people together in equal shares. Most people own their home as a joint asset with their partner. On the death of one joint tenant the property automatically passes to the other joint tenant(s), regardless of what may be set out in the deceased person's Will.


Legal Personal Representative (LPR)
The executor of your Will or administrator of your estate if you die without a Will.
Life cover
An insurance policy that pays a set amount of money when you die. The irony of calling it life insurance. Payment is to the insured person's beneficiaries. Also known as term life insurance or death cover.
Line of credit loan
Allows you to use a single account for your home loan and everyday spending. Interest is added to the loan each month and repayments are not necessary while the loan is within its credit limit. It allows you access to the equity in your home without having to apply for a new loan.
Loan to value ratio (LVR)
The amount of a loan as a percentage of the value of the asset it was used to buy. It is calculated by dividing the loan amount by the value of the asset. For example taking out a loan of $400,000 on a house worth $500,000 gives a LVR of 80%. Most banks lend up to an LVR of 80% to 90%.
Long term investment
An investment made over a time period of at least five years. Superannuation is a good example of a long term investment. Spending all your month's pay on beers is not a good example of long term.
Low-doc loan
A loan that requires little financial documentation. Primarily for borrowers who do not meet the standard loan application criteria. Typically a higher interest rate will apply.


Managed fund
An investment fund where your money is pooled with that of other investors. The pooled money is then used to buy assets such as shares. A fund manager makes the investment decisions and manages the fund. You receive a return based on the number of units you hold in the managed fund.
Margin call
Occurs when the value of an asset falls below the agreed loan to valuation ratio. The lender will ask the borrower to deposit enough money to bring the loan back to the agreed lending ratio. Typically margin calls are associated with share investing.
Margin Loan
A loan that is taken out to invest in shares or managed funds. The investment is used as security for the loan. An investor can borrow up to a certain level, known as the loan to valuation ratio of the asset that is being invested in. A margin call will occur if the value of the investment falls below a set amount.
Marginal tax rate
The highest rate of income tax that a person pays on what they earn. The more income you earn, the higher the marginal tax rate. A Medicare Levy of 1.5% is added to your marginal tax rate.
Medicare Levy
The Medicare levy funds the scheme that gives Australian residents access to health care. Currently it is 1.5%. A Medicare levy surcharge may apply to high income earners or families that don't have private health care.
Minimum payment
The lowest amount that must be paid each month on a debt such as a loan or credit card.
A form of security used to secure repayment of debt. Commonly this refers to a loan against property. The bank lends money to purchase the property in exchange for holding the title of the property until the loan is repaid.
My Super
This is a government initiative that provides a simple default investment option for people who haven't made an active choice about how their super is invested. For those with unloved super accounts (no investment choice or no contributions are being made) your super will be automatically transferred to a My Super product. My Super products have a simple investment strategy and basic insurance.


New Glossary Term
Insert glossary term definition here.
Non Binding Nomination
Guides your super fund trustee on who to distribute your super to if you die. Non binding means the trustee is likely, although is not bound, to follow your instructions. If there is a compelling reason (say bankrupt beneficiary) the trustee can distribute your super in a different way. Rest assure they cannot give it to anyone on the street. However if you require certainty you can make a binding nomination and ensure that your super goes where you want it to.
Non Concessional Contributions (NCC)
A type of contribution made to super. NCC's believe themselves to be fairly important as they like to be known by different names. AKA personal, undeducted or spouse contributions. NCCs are not taxed when they go into super. There is a limit on how many NCCs you can make to super which is known as the Non Concessional Contributions Cap. Not fez, hat or fedora. Just cap.
Non Concessional Contributions Cap
A limit on the amount of non concessional contributions that can go into super. For the 2014/15 financial year the limit is $180,000, or $540,000 over a 3 year period if under age 65. If you exceed this cap you will enjoy penalty tax of 46.5%. If you have already exceeded your concessional cap (the sister cap to the NCC) and exceed your NCC cap your penalty tax will be 93%. Gulp.


Offset account
A home loan feature. A separate account sits off the home loan and any money deposited into this account is used to 'offset' the interest charged on the mortgage. For example if you owe $300,000 on your mortgage and have $20,000 in your offset account you will pay interest on $280,000.


Permanent Disability Insurance
See Total and Permanent Disability Insurance.
Power of Attorney (PoA)
A document that appoints someone to act on your behalf. A PoA can be as wide or narrow as you specify. For example you can issue a PoA to operate your bank account when you are overseas for two months. By contrast a general PoA gives the appointed person access to do what they like (sell your house, cash in your shares) so it is best not to dish out PoAs like lollies. It is different to an enduring power of attorney.
Relates to an insurance contract. It is the price charged by the insurance company for providing the insurance cover.
Preservation age
The age at which you can withdraw your super. Currently this is between 55 and 60 depending on when you were born. You must also meet a condition of release which, for most people is, no longer working. Only in very limited and exceptional circumstances can super be withdrawn prior to reaching your preservation age.
Preserved benefit
Super can be classified in a few of ways. Preserved is the most common. Similar to the 'innocent until proven guilty' presumption nearly all super is preserved until you can prove otherwise. Proof, in this case, means reaching your preservation age (between 55 and 60) and meeting a condition of release (normally no longer finishing working).
Product Disclosure Statement (PDS)
A document that financial service providers must give to you when they recommend or offer a financial product. It must include information about the product’s key features, fees, commissions, benefits, risks and the complaints handling procedure.
Property investment
Investing in land and/or buildings with the purpose of providing an income return and capital growth over the longer term. Property investment goes beyond residential property and also covers commercial, hotel, leisure, shopping centres and so on.


Real Rate of Return
The rate of return on an investment in excess of inflation. For example, if the rate of return is 10% but the inflation rate is 3%, the real return is 7%.
Redraw facility
A home loan feature. It gives access to (or redraw) any extra money you have paid off your home loan. Different products have different features and some charges can apply when redrawing.
When you replace or extend an existing loan with funds from either the same or a different bank or financial institution. Refinancing can be used to obtain a better (lower) interest rate or to incorporate other debt (say car loan) into a home loan which has a lower interest rate.
The amount of money your investment earns. The return can be an income return or a capital growth return or a combination of both.
The possibility that your investment may fall in value or earn less than expected. Prior to investing it is important to determine your risk profile to ensure that the type of investments chosen are compatible with your situation and financial goals.
Risk Profile
A person's willingness to trade off the risk of losing money in exchange for receiving higher returns over time. Your risk profile will depend on your personal situation, investment experience, time frame and your attitude to risk. Establishing your risk profile is an important step done with your financial planner prior to investing. Also known as an investor risk profile.
Risk Tolerance
The degree of uncertainty you are prepared to accept in relation to investment returns, in particular the extent to which you are prepared to experience a negative return while trying to achieve positive investment returns. Typically growth assets, such as property and shares, will at times deliver negative returns.
The transfer of superannuation from one super fund to another. Rolling over your super means the investments are sold and transferred to cash and the cash is transferred to the new super fund which then buys new investments on your behalf. If rolling over yourself you need to watch out for insurance and exit fees.


Salary Continuance insurance
Protects your salary. If you are sick or injured and can't work 75% of your salary is paid until you can return to work, or for the length of your policy. Salary continuance insurance is held within super. It can also be held outside of super and is known as income protection when it is. Also see Income Protection.
Salary sacrificing
An agreement between you and your employer for you to 'sacrifice' part of your salary to superannuation. Your employer, instead of paying you this amount, directs it to super. The salary sacrificed amount is paid pre tax which represents a tax saving most beneficial to middle and high income earners.
Secured loan
A loan that is backed by an asset. The lender may sell the secured asset to get its money back if you cannot pay the loan. The most common type of secured loan is a mortgage. It is the opposite of an unsecured loan.
Buying a share is buying ownership in a company. As a share holder you are a part company owner! This gives you the right to share in the company's profit (through dividends) and growth (through an increase in the share price. Equally if the company performs poorly your shares can decrease in value and/or you may not receive dividends. Shares are classified as Australian shares or International shares.
Short term investment
An investment that generally matures or is intended to operate for less than two years. Typically short term investments are made into cash and fixed interest style investments.
Stamp duty
A state tax imposed on certain transactions, such as car registrations, mortgages and property transfers. It varies from state to state. The name has been kicking around since 1694! A good example of 'if it ain't broke don't fix it'.
Statement of Advice (SOA)
Previously known as a financial plan. It is the blue print for achieving your financial goals. After meeting with a financial planner, the SoA is issued which defines your goals, the steps to achieve and the recommendations made. By law it must also include the basis on which the advice is given, details of the person and company providing the advice and applicable fees.
A long term investment that is accumulated during your working life to provide an income in retirement. Think of it as a special bucket of money. Your employer is required to put money in the bucket on your behalf. Typically it cannot be accessed until age 55 to 60. There are a number of rules surrounding superannuation and it has attractive tax incentives to encourage individuals to also add money to their super bucket.
Superannuation guarantee (SG)
The minimum amount that your employer must pay into your superannuation on your behalf. The rate increased to 9.5% of your salary from 1 July 2014.


Tax deductions
Tax is paid on income earned. Tax deductions are expenses that reduce assessable income thereby reducing the amount of tax paid. Examples of tax deductions are work related expenses or the cost of washing your work uniform.
Tax free threshold
The level of annual income on which you do not have to pay income tax. See here for the current individual tax rates.
Tax offset
An entitlement which reduces the amount of income tax to be paid. An example is the low income tax offset.
Taxable income
Assessable income less tax deductions equals taxable income. This is what the ATO uses to determine how much income tax you need to pay. See here for the current individual tax rates.
Temporary Disability Insurance
See Income Protection.
Tenants in common
An ownership structure in which two or more people own part of a property. Each owner has the right to deal with their portion separately to the others. Tenants in common may pass their share to a nominated beneficiary in their will.
Today's Dollars
The amount of money required to pay for something today at current prices. It is used when referring to something that will happen in the future. It is removing the effects of inflation and makes comprehension easier by using today's dollars as a guide. For example to comfortably retire you need $800,000 in super in today's dollars.
Total and Permanent Disability Insurance (TPD)
Provides a lump sum benefit if you suffer an illness or injury that leaves you totally and permanently disabled. TPD benefits are used to pay for medical expenses or fund permanent lifestyle changes resulting from the disablement. Strict criteria need to be met in order to claim under TPD.
Trustee (super fund)
The trustee of a super fund is the person or company appointed to manage the super fund on your behalf. There are strict regulations and reporting requirements that must be adhered to by the trustee.


Unit Price
The price for each unit in a managed investment. It is determined by dividing the value of the assets of the managed fund by the number of units held by investors. Similarly to shares, a rising unit price over time indicates a positive return on the investment. Woo Hoo.
Unsecured loan
A loan for which no asset has been used as security. For this reason the interest rate is usually higher than for a secured loan as there is a higher risk to the lender of not getting their money back. An example is a car loan. Opposite to a secured loan.


Variable interest rate
When the interest on an investment or the interest on a loan goes up and down during the term. This is due to fluctuating economic conditions. It is the opposite of a fixed interest rate.
Variable rate home loan
A home loan where payments increase or decrease in line with rises or falls in the official cash rate. If interest rates increase the interest payable on the loan also increases. The same works in reverse. Opposite of a fixed rate home loan.
The up and down movement in price of an investment. The share market provides a good example of volatility as each day the share price of any given company moves up or down or both. Volatility tends to 'smooth out' the longer an investment is held.


A legal document that sets out your instructions as to how you want your assets distributed upon your death.


The rate of return on an investment. Typically associated with shares and is defined as a percentage.