what is tax free threshold in australia
The tax‑free threshold in Australia is currently 18,200 AUD per year for Australian residents for tax purposes, meaning you can earn up to that amount in a financial year without paying income tax on it.
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What is the tax free threshold in Australia? (2025–26 Quick Scoop)
Quick Scoop
In Australia, the tax‑free threshold is the amount of income you can earn before you start paying income tax. For the 2025–26 financial year, that amount is $18,200 for Australian residents.[3][5][7][1] Once you earn more than this, only the income above $18,200 is taxed at the progressive rates.[5][7][1][3]
What is the tax free threshold in Australia?
Put simply, the tax free threshold is the slice of your yearly income that the government does not tax if you are an Australian resident for tax purposes.[7][1][3][5] For 2025–26 (1 July 2025 to 30 June 2026), that amount is fixed at $18,200 and has not been increased in the latest round of rate changes.[1][3][5][7]
- You pay no income tax on the first $18,200 of your taxable income if you are a resident for tax purposes. [3][5][7][1]
- Only the portion of income above $18,200 is taxed at the applicable marginal tax rate. [5][7][1][3]
- Australia uses a progressive tax system, so higher slices of income are taxed at higher percentages. [7][1][3][5]
If you earn $35,000 in 2025–26, the first $18,200 is tax‑free and only the remaining $16,800 is taxed at marginal rates.[1]
Resident tax rates around the threshold (2025–26)
The income tax rates for Australian residents from 1 July 2025 incorporate the tax‑free threshold at the bottom and then step up in brackets.[5][7][1] These rates exclude the 2% Medicare levy, which is usually added on top.[7][1][5]
| Taxable income (2025–26) | Tax on this income (excluding Medicare levy) |
|---|---|
| $0 – $18,200 | No tax payable. | [1][5][7]
| $18,201 – $45,000 | 16 cents for each $1 over $18,200. | [7][1]
| $45,001 – $135,000 | $4,288 plus 30 cents for each $1 over $45,000. | [1][7]
| $135,001 – $190,000 | $31,288 plus 37 cents for each $1 over $135,000. | [7][1]
| $190,001 and over | $51,638 plus 45 cents for each $1 over $190,000. | [1][7]
Because of the tax‑free threshold, your “effective” average tax rate across your whole income is lower than the marginal rate on your top dollar.[5][7][1]
Who can claim the tax free threshold?
You can generally claim the full $18,200 tax free threshold if you are an Australian resident for tax purposes for the entire financial year.[3][7][1] If you become or cease to be a resident part‑way through the year, the threshold is effectively pro‑rated.[3][1]
- Full‑year resident: Usually entitled to the full $18,200 threshold. [3][7][1]
- Part‑year resident: Entitled to a lower, pro‑rated threshold based on months of residency. [1]
- Non‑resident: No tax‑free threshold; tax applies from the first dollar of Australian‑sourced income under non‑resident rates. [7]
For example, a person who is a resident for only 6 months may get a reduced threshold calculated from a base amount plus a proportion of the remaining threshold.[1]
One job vs multiple jobs: important rule
A common practical rule is that you should only claim the tax free threshold from one employer at a time.[4][8][10][1] This is usually your main or highest‑paying job.[8][10][4][1]
- On your main job’s tax file number (TFN) declaration, you tick “Yes” to claim the threshold. [4]
- On any second or additional job, you normally tick “No” so that tax is withheld from the first dollar. [10][8][4]
- If you claim the threshold from more than one job, you may not have enough tax withheld and could get a tax bill at year‑end. [8][10][4][1]
A simple tick in the wrong box when you start a second job is one of the most common reasons people get a surprise tax bill later.[10][4][8]
How offsets lift the “real” tax free point
Even though the formal tax free threshold is $18,200, low‑income tax offsets mean many people can earn more than that before any net income tax is actually payable.[5][3][1] The main one is the Low Income Tax Offset (LITO).[3][5][1]
- LITO can be worth up to about $700 for eligible low‑income earners. [5][3][1]
- Combined with the $18,200 threshold, this can push the effective “tax‑free” income level to roughly $22,575 in 2025–26 (before Medicare levy). [3][5][1]
This is why you may see two different numbers mentioned online: $18,200 as the strict tax free threshold, and around $22,575 as the approximate income level where income tax effectively starts after offsets.[5][3][1]
Mini walkthrough: how it works on a $50,000 salary
Here is a simplified worked example for a resident earning $50,000 in 2025–26, ignoring offsets and Medicare.[1]
- First $18,200: $0 tax, due to the tax free threshold. [1]
- $18,201 – $45,000 slice: taxed at 16%. [7][1]
- Income above $45,000 (that is, $5,000): taxed at 30%. [7][1]
The total tax is the sum of those taxed slices, but the key point is that the first $18,200 is untouched by income tax if you are an Australian resident.[7][1]
Forum‑style questions people are asking right now
“Is the tax free threshold going up?”
Many forum users are asking whether the tax free threshold will be lifted with cost‑of‑living pressures, especially in 2025–26 and beyond.[3][5][1] As of the latest information, the threshold itself remains at $18,200, while changes have focused on marginal tax rates (Stage 3 tax cuts) rather than the threshold.[5][7][1]
“Is it better not to claim the tax free threshold?”
Some people wonder if they should avoid claiming it to “get a refund later.”[8][10] If you do not claim the threshold, more tax is taken out of your pay during the year, and you may get a larger refund, but your take‑home pay each payday is lower.[10][8]
- Claiming the threshold from your main job usually maximises your take‑home pay across the year. [8][10]
- Not claiming it can act like a forced saving via the ATO, but it is not free money—just your own tax withheld. [10][8]
“Does the tax free threshold apply to super or investment income?”
The threshold applies to your total taxable income, which can include wages, some investment income, and other assessable amounts.[3][5][7] However, different income types (for example, superannuation in the fund) can be taxed under separate rules, so the way the threshold interacts with them may differ.[5][3][7][1]
Latest news & trends around the tax free threshold
Recent discussion has focused more on headline tax cuts and bracket adjustments than on directly increasing the tax free threshold.[5][7][1] Stage 3 tax changes from July 2024 reshaped several brackets, reducing lower‑tier rates (for example, 16% and 30% bands) while keeping the $18,200 threshold itself.[7][1][5]
- Cost‑of‑living debates often mention the idea of lifting the threshold as a way to give immediate relief to low‑income earners.
- Policy proposals vary, so any change to the $18,200 level would depend on future government decisions and legislation.
For now, if you are planning your 2025–26 finances, you should assume the formal tax free threshold is $18,200 unless and until new law is passed.[3][1][5][7]
Key takeaways
- The tax free threshold in Australia for 2025–26 is $18,200 for Australian residents for tax purposes. [1][3][5][7]
- You only pay tax on income above that amount, at progressive marginal rates. [5][7][1]
- Offsets like LITO can push the effective zero‑tax point to about $22,575 before Medicare. [3][1][5]
- Claim the threshold from one employer only, usually your primary job, to avoid under‑withholding. [4][8][10][1]
- The Medicare levy (typically 2%) is separate and sits on top of income tax. [7][1][5]
TL;DR: If you are an Australian resident, the first $18,200 of your taxable income in 2025–26 is tax free, and with low‑income offsets you might pay no income tax until around $22,575, though the Medicare levy can still apply.
[1][3][5][7]Information gathered from public forums or data available on the internet and portrayed here.
