What Is the Tax-Free Threshold in Australia? A Complete Guide for 2025

How Does the Tax-Free Threshold Work in Australia?

The tax-free threshold is like having a "free pass" on the first chunk of your income each financial year. As an Australian resident, you won't pay any tax on the first $18,200 you earn. After that, you'll start paying tax at different rates depending on your income bracket.

Here's a practical example:

• If you earn $30,000 per year, you'll only pay tax on $11,800 ($30,000 - $18,200).
• If you earn $15,000 per year, you won't pay any tax at all.

Understanding how the tax-free threshold works can help you plan your finances more effectively.

What Are the Current Tax Brackets in Australia for 2024-25?

Knowing the tax brackets helps you see where the tax-free threshold fits into your overall tax obligations.

Note: These rates don't include the 2% Medicare levy.

How Much Can You Earn Per Week Under the Tax-Free Threshold?

Breaking down the $18,200 annual threshold:

• Weekly: $350
• Fortnightly: $700
• Monthly: $1,517

Example:

Let's say you work at a café in Penrith earning $320 per week. Since this falls under the weekly threshold of $350, you wouldn't pay any tax on these earnings.

Can You Claim the Tax-Free Threshold from Multiple Employers?

You can only claim the tax-free threshold from one employer at a time. If you have multiple jobs, you should claim it from the employer who pays you the most.

Scenario:

• Main job at a design studio: Claim the tax-free threshold.
• Weekend job at a local café: Do not claim the tax-free threshold.

Claiming the threshold from multiple employers can result in a tax debt at the end of the financial year because you haven't paid enough tax throughout the year.

How Does the Tax-Free Threshold Apply to Part-Year Residents in Australia?

If you became or ceased being an Australian resident during the financial year, your tax-free threshold is adjusted based on the number of months you were a resident.

• Base amount: $13,464
• Monthly addition: $395 per month of residency (calculated as $4,736 ÷ 12)

Example:

If you arrived in Australia in January 2025 and became a resident, your tax-free threshold would be:

$13,464 + ($395 × 6) = $15,834 for that financial year.

Understanding this adjustment is crucial to avoid unexpected tax liabilities.

Essential Tips for Claiming the Tax-Free Threshold in Australia

1. Starting a New Job: Complete a Tax File Number (TFN) Declaration form and indicate whether you're claiming the tax-free threshold.
2. Multiple Jobs: Only claim the threshold from your highest-paying employer.
3. Changing Jobs: Update your tax-free threshold claim to your new employer and cancel it with your previous one.
4. Business Income: The threshold applies to your total taxable income, including any business earnings.
5. Non-Residents: Non-residents are not eligible for the tax-free threshold and pay tax from the first dollar earned.

How to Maximize Your Benefits Under the Tax-Free Threshold in Australia

If you're a creative professional in Western Sydney, understanding how the tax-free threshold affects your income is crucial. Whether you're a musician gigging on weekends or a graphic designer launching your career, leveraging the tax-free threshold can significantly impact your take-home pay.

• Budgeting: Plan your expenses knowing a portion of your income isn't taxed.
• Multiple Income Streams: Strategically choose which income source to claim the threshold from.
• Tax Planning: Consider potential tax liabilities if taking on additional work.

Being informed empowers you to make decisions that maximize your earnings and minimize tax obligations.

Start Your Smart Tax Planning with the Tax-Free Threshold

Understanding the tax-free threshold is just the beginning of smart tax planning in Australia. While this guide provides the basics, everyone's situation is unique. For personalized advice, consider consulting with a tax professional who understands the creative industry.