Answer
The tax-free threshold is the amount of income an Australian resident can earn before they are required to pay tax. As of the current financial year, the tax-free threshold is $18,200. This means if your annual income is below this amount, you generally will not have tax withheld from your wages.
How Do You Claim The Tax-Free Threshold?
When you start a new job, your employer will give you a Tax File Number (TFN) Declaration Form. On this form, you can choose whether to claim the tax-free threshold.
If you claim the threshold, your employer will withhold less tax from your pay. If you do not claim it, they will withhold tax at a higher rate.
What Happens If You Have Multiple Jobs?
You should only claim the tax-free threshold from one employer at a time—typically the one that pays you the most. If you claim it from multiple employers, you may not have enough tax withheld and could end up owing tax at the end of the financial year.
What If You Don’t Provide A TFN?
If you don’t provide a TFN, you cannot claim the tax-free threshold, and your employer must withhold tax at the highest rate (47%). This means you could pay more tax than necessary.
How Does The Tax-Free Threshold Affect Your Tax Return?
At the end of the financial year, the ATO calculates your total income and tax withheld. If too much tax was deducted because you didn’t claim the tax-free threshold correctly, you may receive a refund when you lodge your tax return.
More Information
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