Luckily, the first $18,200 of your income is tax-free.
The tax-free threshold has more than tripled since 2011-2012 at $6,000 to a whopping $18,200. This threshold currently remains for the 2017 tax year.
Australia’s progressive tax code is divided into five different income brackets, each with its own tax rate.
The tax rate for the lowest income bracket, that which falls between taxable incomes of $0 and $18,200, has a tax rate of 0%. The $18,200 upper limit of the lowest bracket is what’s known as the tax-free threshold because the first $18,200 of your income is not taxed.
This means that you only pay tax on the income that falls above this lowest bracket. If all of your income is within this first bracket, you pay no tax at all. And even if your total income falls into a higher bracket, you still pay no tax on the first $18,200 of your income. When you factor in the Low Income Tax Offset (LITO), you can earn up to $20,542 without paying any tax.
How to Claim tax-free threshold Australia
When you claim the tax-free threshold, you reduce the amount of tax withheld from your wages over the course of the year. In terms of PAYG withholding, claiming the tax-free threshold can amount to an extra
- $350 per week
- $700 per fortnight
- $1,517 per month
If you are an Australian resident for tax purposes, you must let your payer (including Centrelink) know that you wish to claim the tax-free threshold by marking “Yes” when you fill out your Tax file number declaration. If you have more than one payer, it’s generally best to claim the tax-free threshold from the one that pays you the most.
If you are a part-year resident or a newcomer to Austrailia, your tax-free threshold will be adjusted to the flat amount of $13,464 or the remaining $4,736 for how many months you resided in Australia during the income year; including the month you arrived. This will apply to you if you:
- entered during the year to reside in Australia, and
- left Australia with the intention to stay overseas during the year
However, not everyone gets to claim the full tax-free threshold of $18,200, including those who:
- left Australia permanently during the year, and
- are not an Australian resident for tax purposes
The tax-free threshold is just one of the many benefits you can take advantage of when you lodge your return. Take advantage of E-Lodge to make sure you maximise your refund.
It’s Easier With E-Lodge™
Photo via adesigna on Flickr.Tags: 2013 taxes, carbon tax, resident for tax purposes, tax free threshold