Tax-free threshold
The first $18,200 of income each year that Australian residents pay no income tax on at all.
Every Australian resident for tax purposes gets the first $18,200 of income tax-free. Only income above that point starts attracting tax, beginning at 16%.
You claim it by ticking the tax-free threshold question on the TFN declaration you give your employer. Doing so tells them to withhold less tax from each pay, spreading the benefit across the year rather than delivering it as a refund.
The threshold is claimed from one employer only — normally whichever pays you the most. If you claim it from two jobs at once, both will under-withhold and you are likely to owe money at tax time.
Earning $25,000 for the year
The first $18,200 is tax-free. Tax applies at 16% to the remaining $6,800, giving roughly $1,088 of income tax before any offsets are applied.
The bit people get wrong
If you have a second job and correctly decline the threshold there, that job's tax looks punishingly high on the payslip. It is not a penalty — it is the system withholding correctly, because your tax-free amount is already used up by the first job.
Common questions
Should I claim the tax-free threshold from both jobs?
No. Claim it from one employer only, usually your highest-paying job. Claiming twice means too little tax is withheld overall and you will face a bill when you lodge.
Do foreign residents get the tax-free threshold?
No. Non-residents for tax purposes are taxed from the first dollar at the foreign resident rates, with no tax-free amount available.
What if I only worked part of the year?
If you became or stopped being a resident during the year, the threshold is pro-rated based on the months you were a resident, so the full $18,200 may not be available.
Run your own numbers
Related terms
Source: Australian Taxation Office