The $18,200 Tax-Free Threshold
Every Australian resident gets the first $18,200 tax-free. Once your taxable income exceeds this amount, you start paying 16 cents for every dollar above the threshold. This means earning $18,201 doesn't suddenly make all your income taxable — only the $1 above is taxed.
Jump to: What happens at this threshold, Salary comparison, Tax tips, FAQ.
What happens at the $18,200 threshold?
The table below shows the exact tax change as income crosses $18,200. Each row uses Australian 2025-26 resident rates including Medicare levy.
| Income | Income Tax | Medicare Levy | Total Tax | Take-Home | Effective Rate | Marginal Rate |
|---|---|---|---|---|---|---|
| $18,199below | $0 | $364 | $364 | $17,835 | 2.0% | 0.0% |
| $18,200 threshold | $0 | $364 | $364 | $17,836 | 2.0% | 0.0% |
| $19,200+$1,000 | $160 | $384 | $544 | $18,656 | 2.8% | 16.0% |
Tax on the first $1,000 below $18,200: $20. Tax on the first $1,000 above $18,200: $180.
Salary comparison around $18,200
How take-home pay and effective tax rate change for salaries near this threshold (2025-26, Australian resident, no HELP debt or salary sacrifice).
| Salary | Income Tax | Medicare Levy | Take-Home | Effective Rate | Marginal Rate |
|---|---|---|---|---|---|
| $20,000 | $288 | $400 | $19,312 | 3.4% | 16.0% |
| $25,000 | $1,088 | $500 | $23,412 | 6.4% | 16.0% |
| $30,000 | $1,888 | $600 | $27,512 | 8.3% | 16.0% |
| $35,000 | $2,688 | $700 | $31,612 | 9.7% | 16.0% |
| $40,000 | $3,488 | $800 | $35,712 | 10.7% | 16.0% |
Use the Income Tax Calculator to model your exact situation with deductions, HELP debt, or salary sacrifice.
Tax tips at this income level
Claim the tax-free threshold from only one employer
If you have multiple jobs, only claim the tax-free threshold from your main employer. Claiming it from two employers results in under-withheld tax and a debt at tax time.
Lodge a return even on a low income
If you earned any income, you may still need to lodge a return. You may also be entitled to a refund of tax withheld by your employer if your total income is under $18,200.
Check your low-income tax offset (LITO)
If your income is near the threshold, you may be eligible for the low-income tax offset of up to $700, which can reduce your tax liability even further. Use calculator →
Consider income splitting (where legal)
If you're a sole trader or running a small business, income splitting with a family member — where legitimate — can keep more income under the threshold.
Model your exact tax situation
The numbers above assume no deductions, HELP debt, or salary sacrifice. Use the calculators below for a personalised estimate.
See all 2025-26 tax bracket tables or compare brackets with the Marginal Tax Rates guide.