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All about tax free threshold in Australia.

By Will Elton, Last updated: 2021-06-03 (originally published on 2019-04-14)

Every Australian resident employees have to pay income tax weather you are part time job holder, full time or causally job holder. In that sense you need to aware about income tax in Australia. Here we cover an important topic about tax free thresholds in Australia.

Do you want to lean about government grants in Australia ?

What is tax free threshold in Australia?

The tax free thresholds refers to amount of dollars one can earn in a year which is not subjected to tax liability. The tax free threshold in Australia is $18,200, up to which your earnings are tax-free. In calculation,The $18,200 tax-free threshold is equivalent to:

  • $350 a week
  • $700 a fortnight
  • $1,517 a month.

If you earn more than this threshold, you need to pay tax on excess income.

Note: Non Australian residents can’t exercise tax free threshold, that means one should pay tax on everything they earn in Australia.

Resident Tax rates in Australia 2018-19

Taxable income

Tax on this income

0 – $18,200

Nil

$18,201 – $37,000

19c for each $1 over $18,200

$37,001 – $90,000

$3,572 plus 32.5c for each $1 over $37,000

$90,001 – $180,000

$20,797 plus 37c for each $1 over $90,000

$180,001 and over

$54,097 plus 45c for each $1 over $180,000

he above rates do not include the Medicare levy of 2%.

The above rates include changes announced in the 2018-19 Federal Budget.

Foreign resident tax rates 2018–19

Taxable income

Tax on this income

0 – $90,000

32.5c for each $1

$90,001 – $180,000

$29,250 plus 37c for each $1 over $90,000

$180,001 and over

$62,550 plus 45c for each $1 over $180,000

The above rates include changes implementing changes announced in the 2018-19 Federal Budget.

What you need to know about claiming the tax free threshold?

Tax file Number

Tax file numbers are unique numbers issued by the Australian Taxation Office (ATO) to identify individuals, corporations and others who lodge income tax returns with the ATO.

When you start a job, your payer (employer) will give you a Tax file number declaration to complete.

Centrelink is also a payer and they will give you this form if you apply for their payments.

Note : Centerlink: It delivers a range of government payments and services for retirees, the unemployed, families, carers, parents, people with disabilities, Indigenous Australians, students, apprentices and people from diverse cultural and linguistic backgrounds, and provides services at times of major change.

You tell your payer you want to claim the tax-free threshold.

What is PAYG in Australia?

Income from two payers

The scenario can be:

  • You have have two jobs
  • You are receiving a taxable pension or government allowance and also have a regular part time job.

In case you have two jobs/ payee then you can opt-out of claiming the tax free threshold. You need to 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.

Sometimes the total tax withheld from all sources may be less or more than needed to meet your end-of-year tax liability. You won’t be out of pocket because the withheld amounts are credited to you when you lodge your income tax return. But if you want, you can apply to change the amounts withheld to more closely match your end-of-year tax liability:

Note:

If you’re certain your total annual income from all payers will be less than $18,200 you can claim the tax-free threshold from each payer.

  • If you do this, and your total income later increases to above $18,200, you’ll need to provide a new Withholding declaration to one of your payers to stop claiming the tax-free threshold from that payer.

If your income is over $18,200 and too much is withheld

You can apply to reduce the amounts withheld from your payments by lodging a PAYG with holding variation application.

When we receive your application, we’ll calculate the varied amount and provide your payers with new instructions for withholding tax. You should only apply for this variation if you’re certain of your income amounts and are disadvantaged by the current withholding rates.

If too little is withheld

Sometimes the total tax withheld from your payments may be too little to cover your likely tax liability.

To avoid an end-of-year tax debt, you can ask one or more of your payers to increase the amount they withhold from your payments. Your request should be in writing, but can be in any format – you can send an email request, or a paper or computer-based form.

What you should know about tax free threshold if you are leaving the country to reside overseas.

In this environment your annual tax free threshold will be less than to resident tax payers.

You are entitled to a tax threshold of $13,464 plus ($4,736 divided by 12 months, multiplied by a number of months you were a resident for tax purposes, including the month you left).

What is Tax-free Threshold in Australia for Newcomers

The new residents who came with in tension of residing in Australia will also have tax free threshold and will be adjusted accordingly , albeit lower than the entire year’s threshold available to resident taxpayers. Your tax-free threshold has two components:

  • Flat $13,464 tax threshold
  • Combined with an additional $4,736 applicable for a number of months residing in the country during the income year.

The financial year runs from 1 July to 30 June, so one should count the months you were residing in Australia within the period.

FAQ:

  • I am not Australian Citizen, Can I claim for tax free thresholds?

No, you can’t, your whole income is taxable. You can’t claim for tax free threshold.

  • I get paid off more than $18,200, but i have not claim tax free thresholds yet.

You can claim and get huge tax payment refunded.

  • My refund is lower than last year.

The tax free threshold is $18,200, you might have paid less tax resulting more money for each payout.

  • I’m currently doing two jobs but the income from both is not fixed. Should I claim the tax-free threshold in this regard?

We recommend opting for tax-free threshold for a job that pays you more than the second job. If the income is less than $18,200 annually, claim a refund. If the amount exceeds $18,200, the due taxes will be lower too.

Tags: Australia | tax | tax threshold | z-syndicate

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