What is the tax free threshold in Australia?

For tax purposes, if you are an Australian resident the first $18,200 of your total yearly income is not subject to income tax. This is the tax-free threshold. By claiming the threshold, you are effectively reducing the amount of tax that is withheld from you throughout the year.

The tax-free threshold for 2015-16 was $18,200. You are liable to pay income tax when your taxable income exceeds the tax-free threshold.

Australians are subject to a variety of taxes, at all levels of government, for expert guidance on all matters related to tax law you should engage a taxation lawyer.

How to claim the tax-free threshold

Whenever you start employment at a new job your employer (payer) will give you a Tax File Number Declaration (NAT 3092) for you to complete. Should you apply for payments from Centrelink they will also request you complete a tax file number declaration as they are also classified as a payer by the ATO.

Question 8 of the Tax File Number Declaration asks ‘Do you want to claim the tax-free threshold from this payer?’ to which you place an ‘X’ in the Yes box. After this you are given 28 days to submit your Tax File Number Declaration with your tax file number to your payer in order to claim an exemption.

If your income falls below the tax-free threshold and you are under 18 years old, you can also be exempt from paying tax.

What if you have more than one payer?

Should you have more than one payer (employer) at the same time, you are required to claim the tax-free threshold from your primary source of income. That is, you may only claim the tax-free threshold from the employer who pays the larger portion of your total salary.

Your second employer would then be required to withhold tax at the higher ‘no tax-free threshold’ rate. If however, you are certain that your total income will be less than $18,200 you may then claim the tax-free threshold from each employer.

LawPath can connect you with a network of experienced taxation lawyers to assist with your tax law needs. Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.

Nina Marie Bishay

Nina is a Paralegal working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a passion for copyright law, her research focuses on small businesses, and how they can navigate convoluted legal procedures.