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Tax-Free Threshold: Should You Claim It?

The tax-free threshold is the first $18,200 of taxable income an Australian resident earns in a year, taxed at nil. You claim it from a payer on your tax file number declaration, and for 2026-27 a payer that applies it withholds nothing until you earn above $363 a week, $726 a fortnight or $1,573 a month. Without it, tax is withheld from the first dollar. Enter one pay to see the tax withheld both ways, and what each leaves at tax time.

Your details

Before tax, from one payer, on the cycle below.

Kept each fortnight by claiming the threshold

$188

Tax withheld with the threshold, scale 2
$148
Tax withheld without it, scale 1
$336
Difference over 26 pays
$4,888
Tax at assessment on $39,000, this pay alone
$3,275.00
Claimed, at tax time
$573 back
Not claimed, at tax time
$5,461 back
A payer applying the threshold withholds above
$726 a fortnight
The $18,200 threshold spread evenly
$700 a fortnight

Scale 2 is the pay with question 9 of the TFN declaration answered yes, scale 1 with it answered no. Both are the ATO Schedule 1 formulas for payments from 1 July 2026, and both carry the Medicare levy. The tax-time rows treat this pay as your only income for a full year, with the low income tax offset applied when you lodge. With more than one payer, the ATO says to claim the threshold from one of them, usually the one that pays the most, and the second job tax calculator on this site works out both pays together.

Worked examples, with the arithmetic.

The same sums the tool runs, on real figures. Every number below is computed by the tested engine from the published rates, so the prose and the tool can never disagree.

What does claiming the threshold change on $1,500 a fortnight?

$1,500 / 2, cents dropped, + 99c      = 750.99
scale 2, y = ax - b                   = 0.1790 x 750.99 - 60.8377
rounded, x 2                          = $148 a fortnight
scale 1, y = ax - b                   = 0.3227 x 750.99 - 74.1674
rounded, x 2                          = $336 a fortnight
kept by claiming, x 26                = $4,888 a year
tax at assessment on $39,000          = $3,275.00
claimed                               = $573 back at tax time
not claimed                           = $5,461 back at tax time

Claiming it keeps $188 a fortnight in your pay: $148 withheld instead of $336. As your only job, the year owes $3,275.00 on $39,000 either way. Claimed, the year ends $573 back at tax time, because the low income tax offset is applied only when you lodge. Not claimed, it ends $5,461 back at tax time: the same tax, with $4,888 of it taken early.

What if you earn $350 a week and do not claim it?

$18,200 / 52                          = $350 a week
scale 2, threshold claimed            = $0 withheld
scale 1, not claimed                  = $62 a week
x 52 pays                             = $3,224 a year
tax at assessment on $18,200          = $0.00
not claimed                           = $3,224 back at tax time

$350 a week is the $18,200 threshold spread over a year, so a year of it owes no income tax. Claimed, nothing is withheld. Not claimed, scale 1 withholds $62 a week from the first dollar, $3,224 over the year, and all of it waits for your tax return.

What happens at tax time if two payers both apply the threshold?

main job $1,500 a fortnight, scale 2  = $148 withheld
second job $600, scale 1              = $104 withheld
second job $600, scale 2              = $0 withheld
tax owed on $54,600                   = $7,811
claimed from the main job only        = $1,259 owed at tax time
claimed from both                     = $3,963 owed at tax time

Each payer withholds as though its pay were your only income. Claimed twice, the second job withholds $0 a fortnight instead of $104, because scale 2 gives that pay a tax-free threshold of its own when the main job has already used it. The tax owed on $54,600 is the same either way, so the amount to pay grows from $1,259 to $3,963. Even claimed once, two pays can leave a bill, which the Second Job Tax Calculator works out for your own figures.

What if both pays together stay at or under $18,200?

main job $400 a fortnight, scale 2    = $0 withheld
second job $200, scale 1              = $30 withheld
income for the year                   = $15,600
tax owed                              = $0.00
claimed from the main job only        = $780 back at tax time
claimed from both                     = $0 withheld, $0 owed

The ATO lets you claim the threshold from each payer when you are certain your total from all payers will be $18,200 or less. Claimed from one, the second job withholds $30 a fortnight, which comes back as a $780 refund. Claimed from both, nothing is withheld and nothing is owed. If the total later heads over $18,200, give one payer a withholding declaration to stop claiming it there.

What is the tax-free threshold for a part-year resident?

flat amount                           = $13,464
$4,736 x 3 / 12                       = $1,184
threshold for the year                = $14,648

The ATO's own example: John became a resident on 17 April, so April, May and June count, 3 of the 12 months. His threshold is $13,464 plus $4,736 times 3 over 12, $14,648, and the other tax rates start where they always do. A resident for all 12 months gets the full $18,200. A foreign resident for the whole year gets none.

Is this accurate, and how does it work?

The method is published rather than described. Nothing here is a black box, and the limits are listed as plainly as the workings.

  1. 1Start from the nil band. The 2026-27 resident rates charge nothing on the first $18,200 of taxable income, then 15c on each dollar to $45,000. That nil band is the tax-free threshold. It belongs to the year rather than to a payer, and counts once against your total income from every source, however many payers there are. The Tax Brackets page lists every band.
  2. 2Answer question 9 on each TFN declaration. Every payer asks "Do you want to claim the tax-free threshold from this payer?" on the tax file number declaration you give it when you start. Yes puts your pay on scale 2 of the ATO Schedule 1 formulas, and no puts it on scale 1. Centrelink is a payer too, and takes the same declaration.
  3. 3Run one pay through both scales. The pay becomes weekly earnings, whole dollars plus 99 cents, with a fortnight halved first and a month multiplied by 3 and divided by 13. Scale 2 is nil below $362 of weekly earnings. Scale 1 has no nil band and withholds 15c in the dollar from the first dollar. Each result is rounded to the dollar and scaled back to the pay, the arithmetic the Tax Withheld Calculator shows line by line.
  4. 4Set a year of each against the assessment. Each pay is multiplied by 52, 26 or 12 and set against the tax a full year of it owes as your only income: the resident rates, less the Low Income Tax Offset, plus the Medicare levy, the assessment the Income Tax Calculator runs. The tax owed is the same whichever scale was used. Only the withholding differs, and the gap is refunded or owed when you lodge.
  5. 5Check it against the printed tables. The comparison further down reads the rows the ATO prints in its weekly, fortnightly and monthly tax tables, column 2 with the threshold claimed and column 3 without it, and this site checks every printed row of all three against the same formulas. The Weekly Tax Table, Fortnightly Tax Table and Monthly Tax Table print them in full.

The threshold per pay, and where withholding starts.

$18,200 spread evenly over a year is the first column, the equivalents the ATO gives. A payer that applies the threshold starts withholding a little higher, at the point the ATO states, and the printed tax tables withhold their first dollar a few dollars later again, because the formula rounds the first few cents to nil.

The tax-free threshold per pay and where withholding starts, 2026-27
Paid$18,200 spread evenlyATO: withholding starts aboveFirst dollar withheld in the printed table
Weekly$350$363$365
Fortnightly$700$726$730
Monthly$1,517$1,573$1,581.67

Tax withheld with and without the threshold, 2026-27.

The same incomes on each pay cycle, a week doubled for a fortnight and multiplied by 13 over 3 for a month. Every figure is the row the ATO prints for that pay, column 2 with the threshold claimed and column 3 without it, and the last column is what claiming keeps in each pay. For any other pay, the calculator above works it out, and the Weekly Tax Table, Fortnightly Tax Table and Monthly Tax Table print every row.

Weekly, NAT 1005
PayClaimedNot claimedKept
$300$0$52$52
$350$0$62$62
$600$42$120$78
$900$106$217$111
$1,200$202$313$111
$1,500$299$409$110
$2,000$459$569$110
Fortnightly, NAT 1006
PayClaimedNot claimedKept
$600$0$104$104
$700$0$124$124
$1,200$84$240$156
$1,800$212$434$222
$2,400$404$626$222
$3,000$598$818$220
$4,000$918$1,138$220
Monthly, NAT 1007
PayClaimedNot claimedKept
$1,300$0$225$225
$1,516.67$0$269$269
$2,600$182$520$338
$3,900$459$940$481
$5,200$875$1,356$481
$6,500$1,296$1,772$476
$8,666.67$1,989$2,466$477

Who should claim it: question 9 of the TFN declaration.

The tax file number declaration you give each new payer asks “Do you want to claim the tax-free threshold from this payer?” The ATO’s instructions for the answer, summarised:

Answer yes if you are

  • an Australian resident for tax purposes who is not claiming the threshold from another payer
  • an Australian resident claiming it from another payer, whose total income from all sources will be under $18,200
  • a foreign resident receiving an Australian Government pension or allowance

Answer no if

  • none of those applies, which includes a foreign resident with no government pension or allowance
  • you are a working holiday maker, on a subclass 417 or 462 visa
  • you already claim it from another payer, a taxable government payment such as JobSeeker, Youth Allowance or Austudy included, and your total will not be under $18,200

Claimed by two payers: what it costs at tax time.

A main job of $1,500 a fortnight that applies the threshold, with a second job beside it. Claimed from the main job only, the second job withholds on scale 1. Claimed from both, it withholds on scale 2 as well, and the tax owed at assessment does not change, so the whole difference turns up as a larger bill. The Second Job Tax Calculator works it out for any two pays.

2026-27, 26 pays a year, both jobs fortnightly, no other income.
Second job a fortnightIncome a yearSecond job withholds, claimed onceClaimed twiceAt tax time, claimed onceClaimed twice
$200$44,200$30$0$209 back$571 owed
$400$49,400$62$0$609 owed$2,221 owed
$600$54,600$104$0$1,259 owed$3,963 owed
$800$59,800$144$12$1,961 owed$5,393 owed
$1,000$65,000$180$42$2,767 owed$6,355 owed

What this does not cover.

  • It uses scales 1 and 2 only, the resident scales. Foreign residents, working holiday makers, payees who give no tax file number, who have the top rate withheld, and Medicare levy exemptions all have their own scales. The Tax Withheld Calculator covers the exemption scales.
  • The tax-time rows treat the pay as your only income for a full year. Other payers, part-year work, deductions and the Medicare levy surcharge all move them, and two pays at once are worked through on the Second Job Tax Calculator.
  • The part-year threshold for a new resident is explained but not applied in the calculator, which assesses a full year at $18,200.
  • Study loan components, tax offsets claimed on a withholding declaration and bonuses withheld under their own schedule are outside it. The HECS Repayment Calculator covers the loan and the Tax on Bonus Calculator a bonus.
  • It runs on the 2026-27 schedules only, for payments made from 1 July 2026, and assumes 52 weekly, 26 fortnightly or 12 monthly pays.

Where these figures come from.

Every rate this site uses is listed on the Methodology page.

Common questions.

What is the tax-free threshold?

The amount of income you can earn in a year before income tax is payable: $18,200 for an Australian resident in 2026-27, the nil band at the bottom of the resident rates. It counts once a year against your total income from every payer, and nothing is paid out for it. Spread evenly it comes to $350 a week, $700 a fortnight or $1,517 a month, the equivalents the ATO gives. Claiming it from a payer is what brings it into your pay, by lowering the tax that payer withholds.

Should I claim the tax-free threshold?

From one payer, yes, if you are an Australian resident for tax purposes and are not claiming it from another payer. That is the ATO's test for answering yes to question 9 of the TFN declaration. On a single job, not claiming it withholds tax the year does not owe: on $1,500 a fortnight, $336 instead of $148, and the extra $4,888 comes back only when you lodge. With two or more payers at once, the ATO says to claim it from one, usually the one that pays the highest salary or wage, and to answer no for the rest unless your total for the year will be $18,200 or less.

How do I claim the tax-free threshold?

Answer yes to question 9, "Do you want to claim the tax-free threshold from this payer?", on the tax file number declaration you give a payer when you start. Many payers have their own electronic version of the form, and the ATO asks you to use it where they do. To change your answer with a payer you already work for, give them a withholding declaration, which is also how you stop claiming it from one of two payers.

Is income under $18,200 tax free?

Yes, for a resident for the full year: no income tax is payable on taxable income of $18,200 or less, and anything withheld comes back when you lodge. The Low Income Tax Offset goes further, so on a full-year income no income tax is payable up to $22,866 in 2026-27. For someone entitled to the seniors and pensioners tax offset the point is higher again, as the SAPTO Calculator shows. The Medicare levy is separate and starts above $28,011, the 2025-26 threshold carried forward because the ATO has not yet published the 2026-27 one. How it shades in is on the Medicare Levy Calculator.

Why is tax withheld when I will earn under the threshold for the year?

Because each pay is read as though every pay in the year were the same size. A casual week of $600 withholds $42 with the threshold claimed and $120 without it, even if quiet weeks leave the year under $18,200. None of it is lost. When you lodge, the year is assessed as a whole and the tax withheld beyond what it owes comes back in your refund, which the Tax Return Calculator estimates from your income statement. That money comes back only once a return is lodged, and Tax Return Deadline 2026 has the 2025-26 due date.

Do I claim the tax-free threshold again when I change jobs?

Yes, from the new employer, even though you claimed it from the one you left. The ATO says you can claim it from a new payer even if you have claimed it from your previous employer, because the old payer has stopped paying you. It only becomes a question of two payers while both are paying you at the same time.

Should I claim the tax-free threshold on a Centrelink payment and a job?

Usually from one of them only. The ATO counts a regular part-time job plus a taxable pension or government allowance as two payers, and says to claim the threshold from one. Its TFN declaration instructions add that anyone receiving a taxable payment such as JobSeeker, Youth Allowance or Austudy is likely to be claiming it from that payment already. The exception is the same as for two jobs: if the total for the year will be $18,200 or less, you can claim it from both. Services Australia does not withhold tax from the Age Pension unless you ask it to, and the Age Pension Calculator works out the tax on wages and the pension together for a pensioner who works.

Can a foreign resident or working holiday maker claim the tax-free threshold?

No. Foreign residents are not entitled to it and must answer no to question 9, unless they receive an Australian Government pension or allowance, and working holiday makers answer no and are taxed at their own rates. A foreign resident for the whole year pays tax from the first dollar. Someone who becomes a resident part of the way through a year gets a part-year threshold instead: $13,464, plus $4,736 apportioned by the months in Australia, the month of arrival included.

Related pages.

  • Second Job Tax CalculatorWork out the tax on a second job for 2026-27, what each employer withholds without the tax-free threshold, and the bill or refund due at tax time.
  • Tax Withheld CalculatorWork out the PAYG tax withheld from a weekly, fortnightly or monthly pay on the ATO 2026-27 formulas, with the working and the tax owed when you lodge.
  • Weekly Tax TableThe ATO weekly tax table for 2026-27: tax withheld from every weekly pay from $1 to $3,400, with and without the tax-free threshold, checked row by row.
  • Fortnightly Tax TableThe ATO fortnightly tax table for 2026-27: tax withheld from every pay of $2 to $6,800, with and without the tax-free threshold, checked row by row.
  • Monthly Tax TableThe ATO monthly tax table for 2026-27: tax withheld from monthly pays of $4.33 to $12,675, with and without the tax-free threshold, checked row by row.
  • Low Income Tax OffsetWork out your low income tax offset for 2026-27. Up to $700, tapering to nil at $66,667, with the tax it saves and why most of it arrives at tax time.

Every calculator on this site is listed on the Wage Calculator page.