Tax Free Threshold

(last updated 23/04/2014)
 
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If you are an Australian resident for tax purposes, the first $18,200 of your annual income is tax FREE. It is commonly referred to as the "tax-free threshold".

When you commence a new job you are required to complete a TFN declaration on which you also make an election (item 8) to claim the tax free threshold. If this is not claimed your employer will not take into account the tax free threshold and you will pay more tax than required. Therefore, by claiming the threshold, you reduce the amount of tax that will be withheld from your pay during the year. Note that if it is a second job you should not claim the tax free threshold as it would already be accounted for by you other employer.
You can view a sample of a TFN Declaration form (PDF) here.

In 2012–13 the $18,200 tax-free threshold for pay as you go (PAYG) withholding purposes is equivalent to:
  • $350 a week
  • $700 a fortnight
  • $1,517 a month.
  • $18,000 a year
When your taxable income exceeds your tax-free threshold you pay tax on the excess at marginal rates of tax.

Adjustments to Tax Free Threshold

Your tax-free threshold may be less than $18,200 in a financial year if you either:
  • entered Australia permanently during the year
  • left Australia permanently during the year
  • are not a resident of Australia for tax purposes.
When one of these occurs you must complete the adjustment item in your tax return showing the date. Part-year residents will be able to access a tax-free threshold of at least $13,464. Access to the remaining $4,736 of the full tax-free threshold will be pro-rated for the number of months you were a resident for tax purposes.

Formula for part-year residents: the tax-free threshold is calculated as:

$13,464 + ($4,736 x number of months as a resident of Australia)

Lodging Tax Return with Income , $18200

Even if your income is less than the tax free threshold you may still need to lodge a tax return. See this post on E-tax Return and Tax Free Threshold.

E-tax Return

See these posts with tips, calculators and checklists to help you prepare your eTax Return (and get a better refund) with less hassle:
For help with your eTax return see our eTax Return Checklist.

Web Based Tax Return App:

A benefit of using eZtax, our web based tax return app, is we have the genuine online tools, knowledge and experience to get the best tax refund for our clients, making it easy to complete your annual tax return online.

Our Web Based Tax Return App will step you through all the necessary questions to increase your  tax refund and take into account all relevant tax deductions and tax offsets. Try it now. Its FREE to get started! 

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