How the Tax-Free Threshold Works
If you're an Australian resident for tax purposes, you don't pay any income tax on the first $18,200 you earn each financial year (1 July to 30 June). This applies automatically when you tick "yes" to claiming the tax-free threshold on your Tax File Number (TFN) declaration.
If you earn exactly $18,200, you pay zero income tax. If you earn $18,201, you pay 16 cents tax on that one dollar above the threshold.
When You Might Not Claim It
You can only claim the tax-free threshold from one employer. If you have two jobs, claim it from the one that pays you the most. Your second employer will withhold tax at a higher rate (no tax-free threshold), and you'll sort out the balance when you lodge your tax return.
If you accidentally claim it from two employers, you'll likely get a tax bill when you lodge your return — the ATO will have under-withheld tax during the year.
Non-Residents
If you're a non-resident for tax purposes (including most working holiday makers), you don't get the tax-free threshold. You pay tax from your first dollar earned — 15% for working holiday makers on the first $45,000, or 30% for other non-residents.
Frequently Asked Questions
Has the tax-free threshold changed?
No. The tax-free threshold has been $18,200 since 2012–13. It was $6,000 before that. There are no announced plans to increase it.
Can I claim it from two jobs?
You should only claim the tax-free threshold from one employer — the one that pays you the most. Your other employer(s) will withhold tax at a higher rate.
Do I need to do anything to claim it?
Just tick 'yes' on your TFN declaration when you start a job. If you forget, your employer will withhold tax as if you don't have the threshold — you'll get the money back when you lodge your return.