The short answer
If you are an Australian resident for tax purposes, the first $18,200 you earn in 2026-27 is free of income tax. That is the statutory tax-free threshold, and it has not moved since 2012-13.
But here is what most guides gloss over: because of the Low Income Tax Offset, you actually pay no income tax until about $22,867. Add the Medicare levy and seniors’ offsets, and there are really four different “tax-free” points depending on who you are. This guide lays out all four, shows exactly how to claim the threshold on your TFN declaration, and runs the dollars on the mistakes that cost people thousands — the two-job double-claim, the part-year trap for new migrants, and the 28-day TFN rule almost nobody warns you about.
What the tax-free threshold actually is
The tax-free threshold is the slice of your annual taxable income the ATO taxes at 0%. For a full-year Australian resident in 2026-27, that slice is $18,200. Everything above it is taxed at the marginal rates:
| Taxable income 2026-27 | Tax rate |
|---|---|
| $0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,020 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,020 + 37c for each $1 over $135,000 |
| Over $190,000 | $51,370 + 45c for each $1 over $190,000 |
Two things to note. First, these rates exclude the 2% Medicare levy, which has its own thresholds. Second, the 15% second-bracket rate is new: it dropped from 16% on 1 July 2026, and it is already legislated to fall to 14% from 1 July 2027. Our income tax rates guide covers the full picture.
And here is the number that surprises people: $18,200 has been frozen since 2012-13 — fourteen years. In real terms it buys roughly half what it did when it was set. Nobody in Canberra is talking about raising it, so treat the figure as permanent and plan around it.
The four layers: where tax really starts for you
Ask “how much can I earn before paying tax?” and you will get different correct answers depending on which tax you mean. Here is the full ladder for 2026-27:
| Layer | Amount | What it means |
|---|---|---|
| 1. Statutory threshold | $18,200 | No income tax on the first $18,200 (residents) |
| 2. With LITO | ~$22,867 | The $700 Low Income Tax Offset wipes out the 15% tax on the next $4,667 — real income-tax-free point |
| 3. Medicare levy | $28,011 | Levy starts phasing in for singles at 10% of the excess, reaching the full 2% at $35,013 |
| 4. Seniors (SAPTO) | ~$36,960 | Single seniors combining SAPTO + LITO pay no income tax to roughly this point |
So a 24-year-old barista earning $25,000 pays a little income tax ($320 after LITO) but no Medicare levy. A retiree on $35,000 of super pension income pays no income tax at all. Same threshold, very different outcomes — which is why the one-number answers on most sites mislead.
Check the maths on layer 2 yourself: tax on $22,867 is 15c × ($22,867 − $18,200) = $700.05, and the full $700 LITO cancels it to zero. For the offsets in detail, see our tax offsets guide; for the levy, our Medicare levy explainer has the family thresholds and the shade-in worked in dollars.
How to claim it: the TFN declaration
You do not get the threshold automatically in your payslip — you claim it. When you start a job, you complete a Tax File Number declaration (paper form NAT 3092, or digitally through your employer’s onboarding or ATO online services). One question on it reads:
“Do you want to claim the tax-free threshold from this payer?”
Answer yes and your employer uses the ATO’s “with tax-free threshold” withholding tables, which spread your $18,200 across the year:
- $350 tax-free per week
- $700 tax-free per fortnight
- $1,517 tax-free per month
Earn under those amounts in a pay cycle and little or no tax is withheld. Earn over them and tax comes out of the excess only.
Answer no and tax is withheld from the first dollar. That is not a punishment — it is the correct choice for a second job, and we will show why below.
Changing your answer mid-year
Circumstances change: your second job becomes your main one, or you leave the job you claimed from. You do not fill in a whole new TFN declaration — you give the payer a Withholding declaration (NAT 3093) with your new answer. The new withholding applies from the next pay cycle. It takes two minutes and it is the single most underused form in the Australian tax system.
The one-payer rule (and the $4,300 mistake)
The threshold is $18,200 in total, not $18,200 per job. Claim it from two payers at once and each withholds as though $18,200 of your income is untaxed — the threshold is applied twice, withholding falls short, and the shortfall lands as a bill when you lodge.
Here is what that looks like in 2026-27 dollars. Say your main job pays $40,000 and your weekend job pays $15,000 — $55,000 combined.
Scenario A — claimed from both jobs (the mistake):
- Main job withholds: 15c × ($40,000 − $18,200) = $3,270
- Second job withholds: $0 (under $18,200, threshold applied)
- Total withheld: $3,270
Scenario B — claimed from the main job only (correct):
- Main job withholds: $3,270 (same as above)
- Second job withholds roughly 15% of $15,000 = ~$2,250 (no-threshold tables)
- Total withheld: ~$5,520
Your actual liability on $55,000: income tax of $7,020, minus $550 LITO, plus $1,100 Medicare levy = $7,570.
- Scenario A bill: $7,570 − $3,270 = ~$4,300
- Scenario B bill: $7,570 − $5,520 = ~$2,050
Notice two things. First, the double-claim alone cost about $2,250 — real money for a weekend worker. Second, even done correctly there is still a ~$2,050 shortfall, because neither employer sees your combined income pushing $10,000 into the 30% bracket. That residual second-job gap is normal, and our second job tax guide shows how to close it by asking your employer to withhold extra.
The rule: claim it from your highest-paying payer — and “payer” includes Centrelink, not just employers. One narrow exception: if your total income from every source will stay under $18,200 for the year, double-claiming cannot create a bill, because no tax is owed either way. Students with two small casual jobs, take note.
Part-year residents: the formula that trips up new migrants
Become an Australian resident for tax purposes partway through the year — or stop being one — and the full $18,200 shrinks to a part-year amount:
Part-year threshold = $13,464 + ($4,736 × months as a resident ÷ 12)
The month you arrive counts as a full month. Worked example: you arrive on 14 January 2027 and become a resident immediately. You are a resident for 6 months (January to June), so your 2026-27 threshold is $13,464 + ($4,736 × 6 ÷ 12) = $15,832. The 15% rate starts biting $2,368 earlier than for a full-year resident.
Critical nuance most guides bury: this is about your tax residency changing, not about working part of the year. If you were an Australian resident all year but only worked six months — a gap between jobs, a semester off, parental leave — you keep the full $18,200. Everything squares up when you lodge, and any over-withholding comes back as a refund.
If residency rules are murky for you, our tax residency guide walks through the tests with worked examples.
Who gets no threshold at all
- Foreign residents (non-residents for the full year): no tax-free threshold — 30c in the dollar from the first dollar of Australian income.
- Working holiday makers (subclass 417 and 462): taxed under their own scale starting at 15% from the first dollar, regardless of residency.
This is the single biggest shock for newcomers: the same $50,000 salary costs a resident about $6,920 in income tax and a foreign resident $15,000. If your visa or living situation changed mid-year, check your residency status before you assume anything.
Centrelink + wages: which payer gets it?
Taxable Centrelink payments — JobSeeker, Youth Allowance, Austudy, Parenting Payment — count as income and Centrelink counts as a payer. You give Centrelink a TFN declaration too, and the same one-payer logic applies: claim from whichever payer pays you the most.
Example: you receive $16,000 in JobSeeker across the year and earn $22,000 from part-time retail. Claim the threshold from the retail job ($22,000 > $16,000). Centrelink then withholds from the first dollar of your payment at the no-threshold rate — which feels harsh, but it prevents a bill, because your combined $38,000 sits well above $18,200. If you claimed from Centrelink instead, the retail job would under-withhold by roughly 15c × $18,200 ≈ $2,730 across the year.
Common mistakes
1. Claiming from two payers at once. The classic. Costs thousands, as the worked example above shows. Fix it with a Withholding declaration the moment you notice.
2. Not claiming when you should. Single job, resident, earning over $18,200 — and you answered “no” (or never gave your TFN declaration). You are over-withholding every pay. It is not lost money — it comes back as a refund at tax time — but you have given the ATO an interest-free loan.
3. The 28-day TFN trap. If you do not provide your TFN within 28 days of starting work, your employer must withhold at the top marginal rate — 47% — from that point on. New migrants waiting on TFN paperwork get hit by this constantly. Tell your employer you have applied; they can use standard rates during the 28-day window.
4. Thinking the threshold is per job. It is $18,200 total across all income — wages, Centrelink, ABN income, bank interest, all of it counts toward the one threshold.
5. Forgetting the Medicare levy. “Tax-free” means income-tax-free. The 2% Medicare levy runs on its own thresholds ($28,011 single phase-in), and LITO does not reduce it.
6. Assuming you must lodge. If your total income is under the threshold, nothing was withheld, and you have no other reason to lodge, you may only need to submit a non-lodgment advice to keep your record clean — not a full return.
Tips to get it right
- One job: claim it, always. Less withholding now, no downside — the ATO reconciles everything at lodgment.
- Two jobs: claim from the highest payer; answer “no” everywhere else. If you will earn under $18,200 total, the double-claim cannot hurt you.
- Changing jobs: you can claim from the new employer even if you claimed from the old one — sequential claims are fine; simultaneous ones are the problem.
- Side income (ABN): no one withholds for you. Set aside roughly your marginal rate from each invoice, or enter PAYG instalments — our PAYG instalments guide explains the system.
- Check mid-year: got a second job in January? Lodge a Withholding declaration with both payers that week, not in June.
- Run your own numbers: our income tax calculator shows your 2026-27 liability at any salary, and the $100k salary breakdown walks through a full payslip line by line.
FAQ
What is the tax-free threshold in Australia for 2026-27?
$18,200 for full-year Australian residents. With the $700 Low Income Tax Offset, no income tax is actually payable until about $22,867.
How do I claim the tax-free threshold?
On the TFN declaration you give each payer — answer “yes” to “Do you want to claim the tax-free threshold from this payer?” for one payer (usually your highest-paying one). Change it later with a Withholding declaration (NAT 3093).
Can I claim the tax-free threshold from two jobs?
You can, but you generally should not: each payer withholds as though $18,200 is untaxed, so you will be under-withheld and face a bill at tax time. The exception is when your total income from all sources stays under $18,200.
What happens if I don’t claim the tax-free threshold?
Your employer withholds more tax than necessary from each pay. Nothing is lost — the excess is refunded when you lodge your return — but your take-home pay is lower all year for no benefit.
Does the tax-free threshold apply to Centrelink payments?
Yes. Centrelink is a payer like any other. If you get both a taxable payment and wages, claim the threshold from whichever pays you more.
Do under-18s get the tax-free threshold?
On wages, yes — the same $18,200 applies. But unearned income (dividends, trust distributions) over $416 is taxed at penalty rates for minors, so a teenager with a share portfolio is in a different regime from one with a checkout job.
The bottom line
The tax-free threshold is simple — $18,200, one payer, claim it on your TFN declaration — and the mistakes are expensive. The double-claim on a second job, the shrunken part-year amount for new migrants, and the 28-day TFN rule are where the real money leaks out. Get the claiming decision right at the start of each job and the ATO’s withholding tables do the rest; get it wrong and you are lending the tax office thousands interest-free, or worse, borrowing from it until July. Run your own numbers on our income tax calculator and check the full 2026-27 rate guide before you sign your next TFN declaration.
