Tax-Free Threshold
The first $18,200 of annual income that is not subject to income tax for Australian residents.
The tax-free threshold is the amount of income you can earn each financial year without paying any income tax. For Australian residents, this threshold is $18,200. Income above this amount is taxed at the applicable marginal rates. The tax-free threshold is only available to Australian residents for tax purposes — foreign residents pay tax from the first dollar earned.
When you start a new job, your employer asks you to complete a TFN declaration where you indicate whether you want to claim the tax-free threshold. If you have multiple jobs, you should generally only claim the threshold from one employer (usually the one that pays you the most) to avoid under-withholding and a potential tax debt at the end of the year.
The $18,200 threshold is effectively built into the PAYG withholding tables your employer uses to calculate tax on each pay. It equates to $350 per week or $1,517 per month of tax-free earnings. For part-year residents, the threshold is pro-rated based on the number of months you were a resident during the financial year.
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Income Tax
Tax levied by the federal government on your taxable income, calculated using progressive tax brackets.
Tax Brackets
The income ranges that determine the rate of tax applied to each portion of your taxable income.
PAYG Withholding
The system where employers withhold income tax from employees' wages and remit it to the ATO throughout the year.
Foreign Resident Tax Rates
Tax rates for individuals who are not Australian residents for tax purposes — no tax-free threshold and different brackets.
Taxable Income
Your assessable income minus allowable deductions — the figure used to calculate your income tax.