Tax-Free Threshold: Who Qualifies and What You Get
Learn how the Tax-Free Threshold works in Australia and ensure you keep more of your annual income by claiming the right amount.
The Tax-Free Threshold is a rule that ensures you do not pay any income tax on a specific portion of the money you earn each year.
Who it's for
This scheme is available to all Australian residents for tax purposes. If you are considered a resident for tax purposes, you are eligible to benefit from this threshold to protect your baseline earnings.
What you get
The benefit is that you pay no tax on the first $18,200 of your annual income. This means that as you earn money throughout the financial year, you only begin to pay income tax on the amount you earn above this specific amount.
What it costs you
There is no financial cost to using this threshold. However, there is a small administrative requirement: you must actively claim the threshold on your TFN declaration form when you start a new job. If you do not indicate this on your paperwork, your employer may withhold tax from your pay from the very first dollar you earn.
The catch to know
A common mistake occurs when people work multiple jobs at once. You cannot claim the threshold on every job you have. If you have two jobs, you must choose only one—typically the one that pays you the most—to claim the threshold. If you claim it on both, you may end up with a debt at the end of the year because not enough tax was withheld from your earnings.
How to apply
- Complete a TFN declaration form when you start a new job.
- Ensure you select the option to claim the tax-free threshold on that form.
- Monitor your payslips to confirm your tax withholding matches your situation.
- Visit the official portal for more details: https://www.ato.gov.au