Tax-Free Threshold in Australia (2026–27): What It Is and How to Claim It

What is the tax-free threshold?

The tax-free threshold is a 0% band at the bottom of the resident tax scale: no tax on the first $18,200, then 15% on each dollar from $18,201 to $45,000 in 2026–27 (the rate was 16% in 2025–26). It is not a separate allowance you apply for. It is built into the tax rates, so everyone who is an Australian resident for tax purposes for the whole year gets it automatically when the ATO assesses their tax return.

What you do choose is whether a payer applies it during the year. According to the ATO, claiming the threshold is equivalent to earning $350 a week, $700 a fortnight or $1,517 a month tax-free from that payer. When you claim it, the employer uses the "tax-free threshold claimed" withholding scale. When you do not, they use a scale that withholds tax from the first dollar.

How to claim the tax-free threshold

You claim the tax-free threshold on the Tax file number declaration (NAT 3092), which you complete when you start with a new payer. Question 9 asks "Do you want to claim the tax-free threshold from this payer?" Many payers have their own electronic version of the form, so the ATO says to check with them first. If they do not, you can complete it in ATO online services through myGov under Employment, then New employment.

• Answer Yes if you are an Australian resident for tax purposes and you are not claiming the threshold from another payer at the same time.
• Also answer Yes if you already claim it from another payer, but only when your total income from all sources will be less than $18,200.
• Answer No if you are a foreign resident (unless you receive an Australian Government pension or allowance) or a working holiday maker. Working holiday makers are taxed at 15% from the first dollar up to $45,000.
• To change your answer later with the same payer, give them a Withholding declaration (NAT 3093). It takes effect from the next payment.

Claiming the tax-free threshold with two jobs

With two jobs you should normally claim the tax-free threshold from one payer only, usually the one that pays you the most. The ATO lists claiming it from more than one employer as a common mistake. Each payer works out your tax as if their job were your only income, so two claims means the first $18,200 is treated as tax-free twice.

Worked example (2026–27 withholding schedules): Mia earns $1,500 a fortnight from her main job and $800 a fortnight from a weekend job, $59,800 for the year. Her main employer withholds $148 a fortnight. If she also claims the threshold at the weekend job, that employer withholds only $12. If she correctly answers No there, it withholds $144. Her actual tax and Medicare levy on $59,800 is about $9,553.

Why you can still get a tax bill after claiming correctly

Answering No at the second job reduces a shortfall but does not always remove it. The second payer's no-threshold scale taxes that pay as if it were all your income. It does not know that your main job has already pushed you into the 30% bracket, and the low income tax offset (LITO) you were expected to get shrinks as your total income rises. The ATO's own example shows the same pattern. A person with a $30,000 pension and a $30,000 part-time job had the threshold applied only to the pension and still finished the year with a debt.

There are two fixes. You can ask the second payer in writing to withhold an extra amount each pay (an upward variation, which Schedule 14 covers). Or you can set money aside. If too much is being withheld instead, for example because large deductions are coming, you can apply for a downward variation using the PAYG withholding variation application (NAT 2036). The ATO aims to process online applications within 28 days and paper ones within 56 days.

The effective tax-free threshold is about $22,866

Because of LITO, a resident with no other offsets pays no income tax until taxable income reaches about $22,866 in 2026–27 ($22,575 in 2025–26). LITO is worth up to $700, and $700 covers the 15% tax on the first $4,666 above the threshold. The Medicare levy also has its own low-income threshold: for 2025–26, no levy at or below $28,011 for a single person, phasing in until $35,013. The 2026–27 Medicare thresholds have not been published yet, so the 2025–26 figures are used here.

This is why many students and part-time workers with income a little above the threshold still get every dollar of withheld tax back when they lodge. It also means the headline $18,200 understates how much a low earner can receive without paying tax. See our low income tax offset guide for the full taper.

Part-year residents get a reduced threshold

If you become or stop being an Australian resident during the year, you get a part-year tax-free threshold. It has two parts: a flat $13,464 plus up to $4,736 pro-rated by the months you were resident, counting the month you arrived. Foreign residents for the whole year get no threshold and pay tax from the first dollar.

Special cases: Centrelink, under-18s and changing jobs

Government payments count. If you receive a taxable payment such as JobSeeker, Youth Allowance or Austudy, the ATO says you are probably already claiming the threshold from that payment. In that case, generally answer No for a new job.

Changing jobs is not a second claim. When one job ends, you can claim the threshold from the new employer even though the old one applied it earlier in the year. An employee under 18 who has not given a TFN declaration has nothing withheld if their pay does not exceed $350 a week, $700 a fortnight or $1,517 a month.