The tax-free threshold means the first $18,200 you earn in a financial year is not taxed, which works out to about $350 a week. It is available to Australian residents for tax purposes, and you should claim it at one employer only, normally your highest paying one.
What it is
Every Australian resident for tax purposes gets the first $18,200 of income each year free of income tax. Only the income above it is taxed, starting at 15c in the dollar in FY2026-27. Spread evenly that is about $350 a week or $700 a fortnight, and those are the figures the withholding tables are built around.
Note that the threshold is an income tax concept, not a Medicare levy one. The Medicare levy has its own separate floor, which for singles in FY2026-27 is $28,011.
Who does not get it
- Foreign residents for tax purposes get no tax-free threshold at all. Their first dollar is taxed at 30c.
- Working holiday makers on 417 or 462 visas have their own scale, taxed at 15c from the first dollar up to $45,000.
- Part-year residents get a pro-rata threshold, worked out from the months they were a resident, with a fixed base amount plus a monthly component.
Residency for tax purposes is not the same as your visa or citizenship. It is a separate test based on where you live and your ties to Australia, and the ATO has tools for working it out.
Why you claim it at only one job
The threshold is an annual entitlement of $18,200, not $18,200 per employer. When you claim it, that employer's withholding is reduced to reflect it. Claim it twice and two employers each reduce their withholding for the same single entitlement, so across the year too little tax is taken and you get a bill.
Claim it at your highest paying job. If you claim it at a small job and not the large one, too much tax is withheld overall, and you have effectively lent the ATO money interest free until you lodge.
If your circumstances change, for example the second job becomes the larger one, you can lodge a new withholding declaration with each employer to switch it over. You do not have to wait for a new financial year.
When not claiming it is deliberate
Some people choose not to claim the threshold anywhere, or ask for extra withholding, because they would rather receive a refund than face a bill. That is a cash flow preference, not a tax saving: you pay the same total either way. The trade is that you hand the ATO an interest-free loan for up to a year in exchange for not having to hold the money yourself.
The case where it genuinely matters is a study debt across two jobs, where neither employer withholds a repayment because neither job alone crosses the threshold, but the combined income does. Asking for extra withholding is the practical fix.
If you earn under $18,200
You may still need to lodge a return. If an employer withheld any tax from your pay, lodging is how you get it back, and for most people in this position the whole amount comes back. If no tax was withheld and you had no other income, you may only need to lodge a non-lodgment advice so the ATO does not keep expecting a return.
Do not assume a low income means the ATO is not waiting on something. Unlodged returns are the most common reason a later refund is delayed.
Frequently Asked Questions
What is the tax-free threshold in Australia?
$18,200 a year. Australian residents for tax purposes pay no income tax on the first $18,200 of income each financial year. Above that, tax starts at 15c in the dollar for FY2026-27.
Should I claim the tax-free threshold?
Yes, at one job. If you have a single job, claim it there. If you have more than one, claim it at your highest paying job and not at the others, so your total withholding lands close to what you actually owe.
What happens if I claim the tax-free threshold twice?
Both employers reduce their withholding for the same single entitlement, so too little tax is withheld across the year. The shortfall becomes a bill when you lodge. It is not a penalty, just deferred tax, but it is an unwelcome surprise.
Do foreign residents get the tax-free threshold?
No. Foreign residents for tax purposes are taxed at 30c from the first dollar and do not receive the threshold. They also do not pay the Medicare levy.
How much can I earn before paying tax in Australia?
$18,200 before income tax applies. The Medicare levy has a separate floor: for singles in FY2026-27 there is no levy at or below $28,011, and it phases in up to $35,013.
A note on what this is
This guide is general information built from the ATO's published material. It is not tax or financial advice, and it cannot take your circumstances into account. Clearway Apps is not a registered tax agent. Where a decision matters, check it against the ATO page linked in each section or talk to a registered tax agent.