This means that if you are an Australian resident for tax purposes, the first $18,200 of your yearly income isn’t taxed. This is what is called the tax-free threshold. You can claim the tax-free threshold to reduce the amount of tax that is withheld from your pay during the year.
When you start a job, your payer (employer) will give you a Tax File Number declaration to complete. You tell your payer you want to claim the tax-free threshold by answering Yes at question 8 ‘Do you want to claim the tax-free threshold form this payer?’
When your taxable income exceeds the tax-free threshold you pay tax on the excess.
If you have income from two payers
If you have more than one payer at the same time, the ATO generally requires that you only claim the tax-free threshold from the payer who usually pays the highest salary or wage.
Your second payer is required to withhold tax at the higher, ‘no tax-free threshold’ rate. The same applies to any additional payers. This reduces the likelihood of you having a tax debt at the end of the financial year.
If your income is less than $18,200
If you earn less than $18,200 from all payers you won’t pay tax for that income year. In this case you have two alternatives:
You may need to lodge a tax return, in order to get back some tax money you paid.
If you don’t lodge a tax return, the ATO requires you to submit a “non-lodgment advice”.
More information
This information is a general guide for our clients. We can help you to lodge your tax return and determine if your income is more or less than the tax-free threshold. Please contact us at hello@precent.com.au, or call us to (+ 61) 2 8317 1281.
Comments