If you earn income in Australia, the Australian government requires you to pay income tax on it.
But what about the tax-free threshold? What exactly does this mean and what is the limit for 2023-2024?
We’ll answer these questions in our simple guide to the tax-free threshold in Australia.
In this article, we’ll cover:
- What is the Tax-free Threshold in Australia?
- What is the Tax-free Threshold in Australia for 2023-2024
- What Counts as Taxable Income?
- Who is Required to Submit a Tax Return in Australia?
- How to Claim the Tax-free Threshold in Australia
- If I Earn Less Than the Tax-free Threshold, Do I Still Need to Lodge a Return?
- Can I Claim the Tax-free Threshold on Two Jobs?>/a>
- When is the Deadline to Lodge My Tax Return in Australia?
- What Happens if I Don’t Claim the Tax-free Threshold?
What is the Tax-Free Threshold in Australia?
The tax-free threshold in Australia refers to the maximum amount you can earn in a year without incurring income tax.
For income earned over the tax-free threshold, there are tax brackets that indicate how much income tax you are responsible for.
Australia’s progressive tax system means that the more income you earn, the higher the income tax you will be responsible for paying.
What is the Tax-Free Threshold in Australia for 2023-2024?
According to the Australian Taxation Office, the tax-free threshold in Australia for 2023-2024 is $18,200.
This means that if you are an Australian resident, you can earn up to $18,200 per year without incurring income tax.
The $18,200 tax-free threshold breaks down to $350 per week, $700 per fortnight, or $1,517 per month.
If you earn over $18,200 for the income year, you need to pay income tax on the excess amount.
|Tax on this Income
|0 – $18,200
|$18,201 – $45,200
|19c for each $1 over $18,200
|$45,001 – $120,000
|$5,092 plus 32.5c for each $1 over $45,000
|$120,001 – $180,000
|$29,467 plus 37c for each $1 over $120,000
|$180,001 and over
|$51,667 plus 45c for each $1 over $180,000
What Counts as Taxable Income?
Wondering what counts as taxable income?
Your taxable income refers to the amount of money left over after subtracting all the eligible claims associated with earning that income.
To determine your taxable income, be sure to take into account any deductions and tax credits you are entitled to.
Taxable income can include:
- Business profits
- Bank interest
- Investment returns
- Side hustles
- Certain assets
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Who Is Required to Submit a Tax Return in Australia?
The following residents are legally required to lodge a tax return in Australia:
- Australian residents whose annual income exceeds the tax-free level of $18,200 for the income year
- Australian residents who have an annual income below $18,200 per year who had tax withheld by their employer
- Every individual who is self-employed, operates a business, or works as a contractor (whether the business is for profit or not)
How to Claim the Tax-Free Threshold
Claiming the tax-free threshold is straightforward. Here’s how to claim the tax-free threshold, according to the Australia Taxation Office (ATO).
When you apply for a new Centrelink payment or begin a new job, you will get a “tax file number declaration” form that you need to fill out.
You simply need to check “Yes” when the form asks if you want to “claim the tax-free threshold from this payer”.
The form will then be sent to be processed by the relevant department.
If I earn less than the tax-free threshold, do I still need to lodge a return?
Yes, all Australian taxpayers need to lodge a return. This means you still need to lodge a tax return even if you earn less than the $18,200 tax-free threshold. On your return, you can claim the tax-free threshold.
If you paid tax during the income year and earned less than $18,200, you are eligible for a tax return.
Can I claim the tax-free threshold on two jobs?
Many taxpayers earn income from more than one source. Whether you have two jobs or receive a pension and work a part-time job, it is important to know the rules surrounding claiming the tax-free threshold with multiple jobs.
The Australian Taxation Office (ATO) states that individuals with two or more sources of income in a financial year can only claim the tax-free threshold on the highest wage or salary. This applies to individuals with multiple income sources in the same financial year.
If you have more than one payer, the ATO states that the tax-free threshold can only be claimed on one job, typically with the highest wage or salary. The second payer will be required to withhold tax on their income at the higher rate.
This may sound negative, but it helps prevent underpaying throughout the year. This eliminates the surprise of paying too little taxes on your income and ending up owing money when you lodge your return.
If you decide to claim the tax-free threshold from each payer, we recommend triple-checking that the total sum of the income of all payers will be below $18,200.
We know that it can be confusing if you earn an income from more than one job or have two payers, so don’t hesitate to contact us with questions about this.
When is the deadline to lodge my tax return in Australia?
You are required to lodge your tax return between the 1st of July and the 31st of October. You may be able to get an extension if a tax agent is lodging your return on your behalf.
If you end up missing the deadline, don’t panic. Rather, contact a tax professional right away. By working with a tax professional, they can help you minimise penalties and help you get your tax return lodged as quickly as possible.
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What happens if I don’t claim the tax-free threshold?
If you do not claim the tax-free threshold, you’ll likely end up paying income tax on all of your income for the financial year.
Australia’s income tax brackets and rates were created on the assumption that residents would claim the tax-free threshold. If you do not claim the tax-free threshold on the first $18,200 of your income, you will likely be overtaxed for that financial year.
If you overpay taxes, the ATO will almost certainly issue a refund for the amount you overpaid once you lodge your return. However, it means you were paying more taxes than necessary throughout the year.
Questions on the Tax-Free Threshold in Australia for 2023-2024? Our Friendly Accountants Are Here to Help!
We know tax time can be overwhelming and confusing. But believe it or not, our accountants love this stuff!
We enjoy helping Australian residents easily lodge accurate tax returns — sometimes in just a matter of minutes!
By operating our business entirely online, we keep our costs as low as possible, allowing us to offer professional tax assistance at affordable rates.
If you need help claiming the tax-free threshold in Australia, contact us with any questions or to schedule an appointment.