What is the tax-free threshold?
It’s the amount you can earn in a financial year (1 July to 30 June) before you pay income tax. Everyone who’s a resident for tax purposes gets it, whatever they earn: it’s the first slice of every income.
| Taxable income | Tax rate in 2026–27 |
|---|---|
| $0 to $18,200 | Nil |
| $18,201 to $45,000 | 15% |
| $45,001 to $135,000 | 30% |
| $135,001 to $190,000 | 37% |
| Over $190,000 | 45% |
The 15% rate was 16% until 30 June 2026. The 2% Medicare levy is on top.
| Slice of income | Rate | Amount due |
|---|---|---|
| First $18,200 | 0% | $0.00 |
| Next $26,800 | 15% | $4,020.00 |
| The last $15,000 | 30% | $4,500.00 |
| Income tax before offsets | $8,520.00 | |
Paying no tax up to $22,866
The low income tax offset takes up to $700 off your tax if you earn $37,500 or less. It shrinks above that, and stops at $66,667. Together with the tax-free threshold, it means you pay no income tax on up to $22,866 in 2026–27.
You also don’t pay the Medicare levy on income up to $28,011.
How to claim it
When you start a job, you fill in a TFN declaration, often online through your employer or myGov. Answer Yes to “Do you want to claim the tax-free threshold from this payer?” Your employer then takes less tax from each pay.
Two or more jobs
- Claim it from one payer only, usually the one that pays you more.
- Your other job then takes tax from your first dollar. That can look like a lot, but it stops you ending up with a tax bill.
- If you claim it from both, too little tax is taken, and you’ll probably owe tax when you lodge your return.
- If your total income from all your jobs will be less than $18,200 for the year, you can claim it from each of them.
To change your choice, give your employer a new withholding declaration.
Who can’t claim it
- Foreign residents pay 30% from the first dollar, up to $135,000.
- Working holiday makers pay 15% from the first dollar, up to $45,000.
- Part-year residents, who arrive in or leave Australia during the year, get a smaller threshold: $13,464, plus a share of $4,736 for the months you’re a resident, counting the month you arrive. For 7 months, that’s $13,464 + $4,736 × 7 ÷ 12 = $16,227.
What happens at tax time
The tax taken from your pay is an estimate. When you lodge your tax return, the ATO works out your actual tax on all your income for the year, applying the tax-free threshold once. If too much was taken, you get a refund. If too little, you owe the difference.
See it in your pay
Our pay calculator shows your tax, Medicare levy and take-home pay for 2026–27.