The tax-free threshold: what it is and when to claim it

Australian residents pay no income tax on the first $18,200 of taxable income each year — about $350 a week. Simple enough. The confusion, and most of the surprise tax bills, come from how the threshold interacts with withholding when you have more than one job.

Claiming it: the TFN declaration checkbox

When you start a job you complete a tax file number declaration, including the question "Do you want to claim the tax-free threshold from this payer?" Say yes, and your employer withholds tax as if your first $18,200 is tax-free — smaller tax out of each pay. Say no, and they withhold from the first dollar.

The second-job rule

The threshold belongs to you, not to each job — you get one per year, not one per employer. The standard guidance: claim it from the payer who pays you the most, and don't claim it from the others.

Claiming it twice doesn't break any law, but both employers will withhold as if the first $18,200 they pay you is tax-free — so together they under-withhold, and the shortfall arrives as a bill at tax time. The reverse is also true: not claiming it anywhere means over-withholding and a refund later. Withholding is a pre-payment estimate; your actual tax is always settled on your return.

"My second job is taxed at 50%!" — no, it isn't

Second jobs feel heavily taxed because without the threshold, withholding starts immediately and your second income stacks on top of your first, entering at your marginal rate. But at assessment time all income is added together and taxed once through the normal brackets. There is no special second-job tax rate — the income tax calculator's "threshold not claimed" option shows exactly what withholding to expect.

Part-year residents and non-residents

Arrive in (or leave) Australia partway through the year and the threshold is pro-rated — a flat $13,464 plus $450 for each month of residency. Non-residents get no threshold at all: 30c tax from the first dollar in 2025–26. Working holiday makers have their own scale, 15% up to $45,000.

Under the threshold? You may still want to lodge

If you earned under $18,200 and had any tax withheld — casual work, a short contract — that withholding is refundable, but only if you lodge a return. For students and part-timers, that's often several hundred dollars sitting with the ATO.