Episode 30: What the hell did you just say? Financial Jargon and Industry Acronyms
August 2, 2021
Is your Advisor talking gobbledygook? Sometimes, we get lost in the world of financial jargon and industry acronyms that we use ALL THE TIME!! So much so that in this episode Trudi doesn't even realise that she is using them! So, we apologise and take you through some of the most common ones that accountants and brokers use on the regular. Hopefully you'll learn a new one or two otherwise Trudi has a handy blog here that also has a useful guide.
Podcast Transcript Available Here
Duration: 20:06
Trudi Cowan: Hello, hello, welcome back. God. Welcome back. Welcome back Kotter theme song everyone, every time we go through it. Today, we're going to focus on the fact that in the accounting finance broking world, we tend to have our own language. And there are a lot of terms and acronyms that just gobbly goo yeah and may not make a lot of sense. If you're not within the industry, then sometimes the acronyms might mean something completely different for you. In your industry. Sarah Eifermann: Yes, that is so true. Trudi Cowan: So we thought we might just run through a few of these. Sarah Eifermann: Yeah, we've got a list of them. Trudi Cowan: These different terms, have a bit of a chat about them. And, yeah, got any others. Drop us a message and let us know. Sarah Eifermann: If you've got any other that means something else. Trudi Cowan: Yes, always love to hear those. Sarah Eifermann: Right let's go from the top. ABN Australian Business Number. Trudi Cowan: If you're in business, and you do not know what an ABN is you need to go and learn that one. That is a starting point. If you run a business in Australia, you should have an ABN and you get the ABN by going to the ABR Yes, which is the Australian Business Register. And that is the register that maintains the list of the ABNs. Yes, we're already having an economic conversation and we're on to number two. Sarah Eifermann: And not to be confused with an ACN, which is a. Trudi Cowan: Australian Company Number. Now you only have one of these if you are a company, and it is a number that is registered with ASIC. Sarah Eifermann: And ASIC are? Trudi Cowan: The body that looks after companies, among many other things. Sarah Eifermann: ASIC is the Australian Securities and Investment Commission. Trudi Cowan: I'm so used to calling it [Cross talking01:57]. Sarah Eifermann: That's not their full name. So you often apply for an ACN, on the ASIC website which is called ASIC Connect which is the Securities and Investment Commission website for everyone that hasn't just picked up what happened there. Right, let's go to the next one. Trudi Cowan: ATO. Sarah Eifermann: Australian Taxation Office Trudi Cowan: Yes, they are the ones that we pay a tax to. Sarah Eifermann: In America, that's called the IRS which is the Internal Revenue Service. Trudi Cowan: Yeah, and in the UK, I think it's HRNS? Sarah Eifermann: Royal majesty. Trudi Cowan: No I feel like I’ve got that wrong. If you’re from the UK send me a message and tell me what it is, but we're on tax SRO is typically the State Revenue Offices, they're all slightly different depending on which state they're in. Yeah. So some combination of those letters usually referring to the State Taxation bodies. Sarah Eifermann: Which is also not land titles, FYI. Or the LTO. Trudi Cowan: Alright, tell me, Sarah, what's the BAS agent? Sarah Eifermann: You know, you are a BAS agent. Trudi Cowan: I'm a tax agent. Sarah Eifermann: Oh but yes because you've got full tax, you got a full TPB. Trudi Cowan: Let's just explain the difference. Sarah Eifermann: Yes. Trudi Cowan: So, a tax agent is someone who is registered to deal with all federal taxation matters on behalf of a client, a BAS agent is only registered to do a GST. Sarah Eifermann: And the Business Activity Statement which is what a BAS stands for. Trudi Cowan: Actually, Well it's probably not just GST but they can't do income tax, okay so typically it would be a bookkeeper is BAS registered and an accountant would be a tax agent. Typically, because not always. Sarah Eifermann: Now, these acronyms if you want to look at them, are mainly on Trudi's website in her blog. What the hell is my accountant saying. Trudi Cowan: Yes, Sarah Eifermann: But just FYI you haven't got BAS. Trudi Cowan: I don't have BAS that's a good one that's missing from my list. So BAS is your Business Activity Statement. Sarah Eifermann: And that’s a document that you send to qualify to the HEO what your turnover is and your income and expenses. Trudi Cowan: Reports or your GST and wages that can report FBT lots of other different. Sarah Eifermann: And GST is Trudi Cowan: Goods and Services Tax, oh my God, I don't even realize how many acronyms that I use on just Sarah Eifermann: Everyday conversational basis? Trudi Cowan: Wow. Yeah okay, back to BAS, sometimes they're also called an IAS. Sarah Eifermann: Yes, they are, which is a? Trudi Cowan: Installment Activity Statement, right. So typically, depending on the type of your business you might do a BAS on a quarterly basis, but you might do an IAS, just on a monthly basis and it will have probably less in it than what the BAS does. So you might need to report for example wages in the IAS. Sarah Eifermann: PAYG withholding tax and PAYG is? Trudi Cowan: Pay as you go. This is actually really blowing my mind right now. Sarah Eifermann: So then CA CPA NTAA. Trudi Cowan: They are all industry bodies that accountants, within chartered accountant certified practicing accountant or national tax and accountant Association. Sarah Eifermann: Yeah, like we have the MFAA Mortgage Finance Association of Australia. CAFBA Commercial Asset Finance Broker Association, and the FBA Finance Broker Association. So, yeah, Trudi Cowan: CGT. Sarah Eifermann: We did this one in a previous episode we did Capital Gains Tax. Trudi Cowan: That's right, Sarah Eifermann: Deductible, Trudi Cowan: I’ll give you the answer DGR. Sarah Eifermann: Well, yeah, that no one will know this one. Trudi Cowan: Deductible Gift Recipient. Sarah Eifermann: Who is a? Trudi Cowan: That someone that you can give a donation to and then claim a deduction for that donation. If they are not a DGR you can't claim it. Sarah Eifermann: A deduction so they have to have that qualified. Trudi Cowan: That's right, Sarah Eifermann: Tip, seven, eight, we have definitely talked about this before. Trudi Cowan: Tip seven-eight is a certain division of the Income Tax Assessment Act or sometimes just referred to as the ITAA. And it is a section that talks about loans made by private companies to their shareholders and Associates. Sarah Eifermann: Right, okay. ELS? Trudi Cowan: Is the Electronic Lodgment System. Sarah Eifermann: That's the main internal word. Trudi Cowan: So that is the system that is lodging our documents electronically. Yeah, where it is relevant for our clients is that we ask you to sign an ELD being the Electronic Lodgment Declaration, and that is where you're actually giving your accountant or authority to lodge those documents on your behalf. So Sarah has probably signed lots of them and never even noticed. Sarah Eifermann: No I know what I'm signing I read what I sign, and unlike most people in life I definitely read everything that I sign. True story. ATP? Trudi Cowan: This is an eligible termination payment. Sarah Eifermann: Yeah, that's when you get terminated by your employer. Trudi Cowan: It's a certain type of payment you might receive on so it might be like redundancy payouts. Sarah Eifermann: Yeah, it has different tax implications, right? Trudi Cowan: That's right. Sarah Eifermann: Yeah. FERB? Foreign Investment Review Board. That's lending and a tax term. Trudi Cowan: Yeah, they will often look at different large-scale deals where foreigners want to invest in certain parts of Australia you might have heard of them if they want to take over a large Australian sorry a foreign company wants to take over a large Australian company, they might have to get FERB approval. Sarah Eifermann: Yeah, but you also have to get it if you don't have residency or citizenship here and you want to buy property. That's how we do it. FITO? Trudi Cowan: Is a Foreign Income Tax Offset. If you're got some income you've earned from overseas and there was some foreign tax paid on that. Yeah, you might receive a FITO in Australia, which is a tax offset that you can receive for that tax paid. Sarah Eifermann: The GIC? Trudi Cowan: General Interest Charge. This is when you're naughty and you don't pay tax on time. Sarah Eifermann: And tax land but it's also potentially part of a contract for loans. Trudi Cowan: There you go, and that's where the same acronyms, often used across. Sarah Eifermann: GST? Trudi Cowan: Goods and Services Tax. Sarah Eifermann: Yes, we've talked about that one plenty. Trudi Cowan: Again if you're in business, and you don't know what GST is. Sarah Eifermann: It’s too late. I'm kidding, go and look it up. GL? Trudi Cowan: General Ledger Sarah Eifermann: And a general ledger is? Trudi Cowan: It's the list of the account names and numbers within your accounting ledger. Sarah Eifermann: Yes, yes, and accounting ledger for people that don't know traditionally is the way that you list your chart of accounts for how you expense, and cost reconcile what comes in as income into your business. Trudi Cowan: Hire HEX or HELP. Sarah Eifermann: Yes, because we've got two names now. Trudi Cowan: So HEX is the Higher Education Contribution Scheme, and HELP is the Higher Education Loan Scheme. That's help as a pay on the end. Sarah Eifermann: Well, it's postgraduate because it used to be PSS when I was at UNI. Trudi Cowan: But basically that's where you do tertiary education, and the government pays for it and then you repay it later. Sarah Eifermann: So HEX is undergrad, HELP is post-grad. Trudi Cowan: No, I think, help is undergrad now as well they've changed it. Sarah Eifermann: Oh they've changed it again. Trudi Cowan: It’s been a while since you were at UNI so Sarah Eifermann: Yeah, I know that. Trudi Cowan: I think we've run through the next couple that I had on my list, ITR your Income Tax Return. Yes, but interestingly some accountants will change that acronym depending on the type of tax return you have. So if you have a company tax return, some of them will refer to as the CTR. Sarah Eifermann: Now they're just being painfully accountants. Good Lord, help us all. I have seen a CTR FYI. Trudi Cowan: If you are a fan of luxury motor vehicles, you might be familiar with LCT, which is Luxury Car Tax, which is an additional tax placed on motor vehicles above a certain threshold. Sarah Eifermann: Yes, and depending on their energy efficiency, it changes as well so it's always really important to see whether the car is, energy-efficient or not. Trudi Cowan: Yeah P&L Profit and Loss statement, so that's what we've discussed previously, the statement that's recording your income and your expenses and showing how much money your business is earning. PAYG, I think we already covered. SBR is Standard Business Reporting, that's just an ATO terminology for some of the reporting in the way we report to them. Sarah Eifermann: Yeah, never use that one myself. Trudi Cowan: STS, Simplified Tax System so if you're a smaller business you're likely to be within the STS system and there are some concessions around your reporting and in the way you need to calculate things if you're within that system. Sarah Eifermann: Yes. Now the difference between being a BAS agent and a tax agent, which you are a tax agent. Trudi Cowan: Which we discussed earlier. Sarah Eifermann: Yeah, but what is the difference is that you do the federal everything to do with tax or as a BAS agent only does GST? Trudi Cowan: GST and PAYG I think. Yeah, yeah, but it's also important to note both BAS and tax agents, it's a federal registration. It doesn't actually give authority to help you with State taxes. Sarah Eifermann: No, and it's federal with the TPB which is the Tax Practitioners Board. Trudi Cowan: That's right and that to all BAS and tax agents are registered through so that's our authorizing body, I guess. Sarah Eifermann: And also some financial planners if they're giving financial planning advice pertinent to tax implications. Trudi Cowan: Yes, that's very true. Sarah Eifermann: TB not tuberculosis apparently. Trudi Cowan: TB is a Trial Balance so that is a list of all your profit and loss and balance sheet accounts with the values, included in them added up all of those numbers should balance to zero. Sarah Eifermann: Right, so your trial balance there you go. TFN? Trudi Cowan: Tax File Number, that's the number that the ATR uses to identify you. Whether you be an individual, a company, a trust, or what have you, and it's a number that you should never disclose to anyone other than the HEO, or your accountant. Sarah Eifermann: I'm giggling at the next one, I shouldn't be giggling, but that's how my humor works, TIA? Trudi Cowan: Why are you giggling? Sarah Eifermann: The Tax Institute of Australia. It could also be a mini-stroke. TIA is the medical definition for a mini-stroke. Trudi Cowan: Oh my goodness. We're at WET. WET is the Wine Equalization Tax. Sarah Eifermann: That one I know. Trudi Cowan: It’s An additional tax that's placed on wine cellars and WHT is Withholding Tax. So it's usually associated with interest dividends or royalties payments that are across borders. Sarah Eifermann: And FBT? Trudi Cowan: Fringe Benefits Tax. Sarah Eifermann: FBT yes fringe benefits tax we did talk about that in the previous episode. Trudi Cowan: We did and that's a tax on any non-cash benefits that you might provide, as an employer. Sarah Eifermann: So let's have a look at some lending ones we mentioned SRO before, so State Revenue Office. LTO Land Title's Office, the F H O G, or the FHOG. It is a national First Home Owners Grant. Trudi Cowan: Of course, I'm thinking what is the FHOG? Sarah Eifermann: She’s staring at me blankly like what planet are you on? What FHOG are you on? Yeah, so First Home Owners Grant, but some of the ones that are more commonly known are LVR which is Loan to Value Ratio, yep. Or another one is LTI Loan to Income Ratio. Trudi Cowan: I suppose these are important in terms of how much the bank will lend you? Sarah Eifermann: Yeah, the interesting is borrowing capacity has about 12 different ways to describe it, including borrowing or servicing capacity. NSR Net Servicing Ratio. LTI Loan to Income, Trudi Cowan: And is a personal preference or the different banks used for Sarah Eifermann: Different banks and different credit assesses. And then DSR Debt to Servicing Ratio. DTI Debt To Income. Trudi Cowan: It all sounds like the same thing. Sarah Eifermann: It is the same thing, they all sound like STDs. Trudi Cowan: Not having to qualify that one for you people. LMI that’s Lenders Mortgage Sarah Eifermann: Lenders Mortgage Insurance. Yes, Trudi Cowan: What is a comparison rate? Sarah Eifermann: Comparison rate, not so much an acronym, but it is the rate and they're on the way out actually because they're not terribly accurate, but the idea of a comparison rate is to give you the true rate of the cost to you of a product over a period of time. But everyone has a different definition of it. Well, different products different amount different ways of paying back a facility. So, a comparison rate traditionally should include any application fees, any redraw fees, any ATM fees if it's got ATM access. So if you use your ATM never, and I use my ATM 25 times a day, it's not a true comparison. So they, traditionally calculated on a loan of 150,000 over a 25-year loan term. Trudi Cowan: I'm not sure the $150,000 loan is really an accurate representation these days. Sarah Eifermann: Which is why they're not really something that you should be used to qualify, whether it's really a competitive comparison because it is apples and oranges. Yeah, they often use them to try and qualify if you take an introductory rate for say two years and then you roll to the higher rate for the rest of the term or whether it's 25 years or 23 years. There's the first floor. Yeah, it changes the true comparison right, but the reality is that most people don't write refinance every 18 months to 24 months we've talked about this. So it's not necessarily accurate in what they do. Surplus is having two definitions which are always terribly helpful. One being the surplus of income with borrowing capacity. And then the other being a surplus of funds. So having cash about is there any surplus, what cash is there available, and if you are having compensation income, what's the surplus or what's the one we haven't said. Trudi Cowan: Assessment, right? Sarah Eifermann: UMI Uncommitted Monthly Income, it's not actually on our Trudi Cowan: UMI? Sarah Eifermann: Yeah, so it's just another way of saying surplus. Trudi Cowan: Sounds like a band. Sarah Eifermann: I'm pretty sure that's called You Am I. Okay, moving on. Trudi Cowan: Sarah is going to try to edit that bit out. Sarah Eifermann: No it's real and authentic I’ll leave it right in there. Assessment Rate, so Assessment Rate talks about, or Assessment Rate has another name which is Sensitized Rate and Sensitized Rate is or Assessment Rate is the right that they, the bank qualifies you for when you apply for a loan. So if the interest rates are 3% there because they're down at 2% at the moment, the benchmark or the base assessment rate will be 5.5% because if rates go up, you can still afford your loan if rates increase. So that they'll benchmark your, capacity to borrow across that higher rate. From that point of view. Okay, so yeah, I'm trying to think if there are any more acronyms that apply, but. Trudi Cowan: I'm sure there are others. Sarah Eifermann: Maybe that Trudi Cowan: Based on how I didn't even realize that I was using them. Sarah Eifermann: Yes. In natural Conversation. Trudi Cowan: I'm guessing there are a lot more and part of the point of wanting to do this episode was one to I guess, run you through what some of them actually meant, but two to point out that to us. That is normal, Sarah Eifermann: They're normal, natural conversation Trudi Cowan: Normal, natural conversation, and while we try hard to not use them when we're talking to, well, Sara tries to not use them when she's talking to clients. She doesn’t even realize we're talking about them. Sarah Eifermann: We don't always realize yes, Trudi Cowan: We don't always realize that we're using them so if we are using terminology that doesn't make sense to you or your advisor is using terminology that doesn't make sense to you, yells dynamite. Stop them and get them to explain to you because it is part of our job to ensure that you fully understand what it is that we are saying. Sarah Eifermann: So when someone yells dynamite at you, you now know why, likely to be me. Trudi Cowan: So please let us know what are the acronyms in your industry that you don't even realize or that you find a bit funny, Sarah Eifermann: Or have a double meaning? Trudi Cowan: Or what are some of the ones that your advisors use that you got no clue about, and you want us to weigh in on, let us know. Share on social, send us a message. Sarah Eifermann: The financial planning and SLA are all it comes to the front of mind which is a Statement of accounts, look at the accountant and you come out, is SOA one that’s in tax? Trudi Cowan: No, no, we just have a Statement Of Account, but we don't call it an SOA, it’s just straight where my head goes. Sarah Eifermann: A statement of advice. Lending was also some new ones that have come in with the best interest Trudi, or BID. B I D, and that is what's called a Statement Of Credit Advice or SOCA. Yep. So if your broker says I need you to sign a SOCA or a CPDS but that's on its way out, which is a Credit Proposal. Trudi Cowan: Well there's one that's probably used across a lot of industries CPD. Yep, Continuing Professional Development. Sarah Eifermann: And PDS, which is Product Disclosure Statement. Trudi Cowan: It's true. Sarah Eifermann: Yes, so there are lots of Trudi Cowan: We are surrounded by acronyms. Sarah Eifermann: All the time, absolutely. And being Australian. That makes complete sense. Trudi Cowan: I was actually thinking it would be interesting to know is this an Australian thing, or is it just worldwide that we like to shorten? Sarah Eifermann: Well we shorten everything. Trudi Cowan: Let us know anyone that's non-Australian is this Sarah Eifermann: Whether you understand anything. Trudi Cowan: But this is a lot of fun sharing this view so please share your thoughts, and we'll speak to you next time. Sarah Eifermann: Cool. You've been listening to today's episode of Financial FOFU, I'm Sarah Eifermann. Trudi Cowan: And I'm Trudi Cowan.———————-
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