What the Tax-Free Threshold Is
The tax-free threshold is the first bracket of the resident tax scale: taxable income from $0 to $18,200 is taxed at nil. Above it you pay 15c for each dollar up to $45,000, then the higher rates set out in our Australian tax brackets guide. It is not a deduction and not a refund. It’s a zero-rate band that every resident gets once per income year, however many jobs they have.
The figure has been $18,200 since 1 July 2012, when it rose from $6,000.
The Effective Tax-Free Threshold with LITO
The low income tax offset gives up to $700 off your tax, and it can reduce tax to nil but not below. At the 2026-27 rate of 15% above $18,200, $700 of offset cancels the tax on the next $4,667 of income. So a resident with no other income or offsets pays no income tax up to $22,866. You don’t claim LITO; the ATO applies it when you lodge.
| Taxable income | Tax before LITO | LITO | Income tax | Medicare levy |
|---|---|---|---|---|
| $18,200 | $0.00 | $0.00 | $0.00 | $0 |
| $20,000 | $270.00 | −$270.00 | $0.00 | $0 |
| $22,866 | $699.90 | −$699.90 | $0.00 | $0 |
| $25,000 | $1,020.00 | −$700.00 | $320.00 | $0 |
| $28,011 | $1,471.65 | −$700.00 | $771.65 | $0 |
| $30,000 | $1,770.00 | −$700.00 | $1,070.00 | $199 |
| $37,500 | $2,895.00 | −$700.00 | $2,195.00 | $750 |
Resident, full year, 2026-27 tax rates, no other offsets. LITO shown only up to the tax it can cancel. Medicare levy uses the ATO’s 2025-26 single threshold of $28,011, the latest published; see the Medicare levy calculator.
How to Claim It on Your TFN Declaration
You claim the threshold through the tax file number declaration you give each new payer, including Centrelink if it pays you a taxable benefit. Question 9 asks: “Do you want to claim the tax-free threshold from this payer?” Answer “Yes” if you’re an Australian resident for tax purposes and either aren’t claiming it from another payer, or are but your total income from all sources will be less than the threshold. Working holiday makers must answer “No”. Answering “Yes” tells the payer to use the ATO withholding scale that builds in the $18,200 band; “No” switches to the higher scale.
Your choice only affects withholding during the year. Your actual tax is worked out when you lodge, and the ATO applies the threshold once to your total income then. Claim it in the wrong place and the difference shows up as a refund or a bill.
Tax Withheld: Claimed vs Not Claimed
With the threshold claimed, nothing is withheld until you earn more than about $363 a week ($726 a fortnight, $1,573 a month). That is a little above $350 a week because the withholding scale builds in part of LITO. Without it, tax is withheld from the first dollar. On $900 a week the gap is $111 a week.
Weekly
| Gross per week | Threshold claimed | Not claimed | Extra withheld |
|---|---|---|---|
| $300 | $0 | $52 | $52 |
| $400 | $6 | $72 | $66 |
| $500 | $21 | $90 | $69 |
| $700 | $65 | $152 | $87 |
| $900 | $106 | $217 | $111 |
| $1,200 | $202 | $313 | $111 |
| $1,500 | $299 | $409 | $110 |
| $2,000 | $459 | $569 | $110 |
Fortnightly
| Gross per fortnight | Threshold claimed | Not claimed | Extra withheld |
|---|---|---|---|
| $600 | $0 | $104 | $104 |
| $800 | $12 | $144 | $132 |
| $1,000 | $42 | $180 | $138 |
| $1,400 | $130 | $304 | $174 |
| $1,800 | $212 | $434 | $222 |
| $2,400 | $404 | $626 | $222 |
| $3,000 | $598 | $818 | $220 |
| $4,000 | $918 | $1,138 | $220 |
ATO Schedule 1 (NAT 1004) formulas for payments from 1 July 2026, Australian resident, no study loan. Full tables: weekly, fortnightly, monthly.
Two Jobs: Claim the Threshold Only Once
If two payers are paying you at the same time, claim the threshold from one of them, usually the one that pays more, and answer “No” on the other. The same applies to a job plus a taxable pension or government allowance. Claim it on both and each payer withholds as if it were your only income. The ATO then taxes the combined total at lodgment and the shortfall arrives as a bill.
If your second job still leaves you under-withheld, you can ask a payer to withhold more with a PAYG withholding variation. The second job tax calculator shows what each job withholds and whether you’re heading for a bill.
- Changed jobs? Once your old employer stops paying you, you can claim the threshold from the new one, even though you claimed it earlier in the year.
- Total income $18,200 or less? If you’re certain your income from every payer combined will stay at or under $18,200, the ATO lets you claim the threshold from each of them. If that changes, stop claiming it at one payer with a withholding declaration.
Part-Year Residents
If you became or stopped being an Australian resident during the year, you get a part-year threshold: a flat $13,464 plus up to $4,736 pro-rated by the months you were resident, counting the month you arrived.
| Months resident | Tax-free threshold |
|---|---|
| 1 | $13,859 |
| 3 | $14,648 |
| 6 | $15,832 |
| 9 | $17,016 |
| 12 | $18,200 |
ATO, How to claim the tax-free threshold. Rounded to the dollar.
Non-Residents and Working Holiday Makers
A foreign resident for the whole year can’t claim the tax-free threshold and pays tax from the first dollar, at the rates in our non-resident tax guide. Working holiday makers on visa subclass 417 or 462 pay 15% from the first dollar on their working holiday income, and the TFN declaration tells them to answer “No”. The one foreign-resident exception on the form is an Australian Government pension or allowance, where a foreign resident can claim it from that payer. See working holiday tax for the full scale.
Residency for tax purposes isn’t the same as visa status. Someone on a temporary visa can still be a resident for tax purposes, and so can claim the threshold.
Related Calculators and Guides
- Australian Tax Brackets: every resident rate and threshold for 2026-27
- Second Job Tax Calculator: tax on two jobs with the threshold claimed once
- TFN Declaration Guide: every question on the form
- Low Income Tax Offset: the offset behind the $22,866 figure
- Take-Home Pay Calculator: your pay after tax, Medicare and super
Frequently Asked Questions
Tax-free threshold questions and answers
What is the tax-free threshold in Australia for 2026-27?
$18,200. It has been $18,200 since 1 July 2012 and is unchanged for 2026-27. Australian residents pay no income tax on the first $18,200 of taxable income, which works out to $350 a week, $700 a fortnight or about $1,517 a month.
How much can I earn before paying tax in Australia?
$18,200 is the tax-free threshold, but the low income tax offset (up to $700) cancels the tax on the next slice of income too. At the 2026-27 rates a resident pays no income tax up to $22,866. The Medicare levy is separate: it starts above $28,011 for a single person (the ATO's latest published threshold, for 2025-26).
Should I claim the tax-free threshold?
Yes, if you are an Australian resident for tax purposes and this is your only job, or your highest-paying one. If someone else is also paying you at the same time, claim it from one payer only, usually the one that pays the most. The exception: if you're certain your total income from all payers will be $18,200 or less, you can claim it from each.
Can I claim the tax-free threshold on two jobs?
Generally no. Claim it on one job and answer "No" on the other, which then withholds at the higher "no tax-free threshold" rate. Claiming it twice means too little tax is withheld, and the ATO collects the shortfall as a bill when you lodge. The only exception is where your total income from every payer will be $18,200 or less for the year.
What happens if I don't claim the tax-free threshold?
Your employer withholds more tax each pay. On $900 a week that is $217 instead of $106 — $111 more a week. The money isn't lost: when you lodge your return the ATO applies the threshold anyway and refunds any tax overpaid.
Do I get the tax-free threshold if I arrived in Australia part-way through the year?
You get a part-year threshold instead: a flat $13,464 plus up to $4,736 pro-rated by the months you were a resident, counting the month you arrived. Someone resident for 6 months gets $15,832.
Can working holiday makers or non-residents claim the tax-free threshold?
Generally no. A foreign resident for the whole year pays tax from the first dollar; the only exception on the TFN declaration is a foreign resident receiving an Australian Government pension or allowance, who can claim it from that payer. Working holiday makers on visa subclass 417 or 462 must answer No: they pay 15% from the first dollar on their working holiday income.
Is the tax-free threshold the same as the Medicare levy threshold?
No. The tax-free threshold ($18,200) applies to income tax. The Medicare levy has its own low-income threshold of $28,011 for singles (2025-26, the latest the ATO has published), with a shade-in above it. For a single person with no other offsets, income between $22,866 and $28,011 attracts income tax but no Medicare levy.
How these figures are worked out▼
Tax is the ATO’s 2026-27 resident scale; LITO is $700 up to $37,500 and tapers after that, and can only reduce tax to nil. The $22,866 figure is the highest whole-dollar income where tax after LITO is nil, found by testing the calculation, not typed in. Withholding figures use the ATO’s Schedule 1 coefficient formulas for payments from 1 July 2026, which reproduce the published tax tables. The claim helper follows the ATO’s rules for one payer, multiple payers, changing jobs and total income of $18,200 or less.
General information, not tax advice. It assumes a full year of residency unless stated, and no other income, deductions or offsets.
Sources & References
- 1How to claim the tax-free threshold (QC103970)— Australian Taxation Office
- 2Multiple jobs or change of job (QC50527)— Australian Taxation Office
- 3Tax rates – Australian resident— Australian Taxation Office
- 4Low income tax offset (QC105020)— Australian Taxation Office
- 5Tax rates – working holiday maker (QC73322)— Australian Taxation Office
Last verified: 23 September 2026. Our content is based on the latest information from official Australian government sources.
Anita Bell
AuthorFounder & Senior Bookkeeper
Accountancy degree (2015); certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One
Anita Bell earned her accountancy degree in 2015 and has worked as a senior bookkeeper with Prime Bookkeeping for over 5 years. This built her skills in Australian and New Zealand tax legislation and industry regulations. She is certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One, and works with payroll and rostering software including Gusto, Deputy, Tsheets and KeyPay. She has strong experience in hospitality, building and construction, financial services, real estate, ecommerce, and medical and health services.
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