Claiming the Tax Free Threshold

Claiming tax free threshold? You might not earn all your income from one employer and that can affect how you fill out your tax return. Your income may also come from more than one payer.

This could be as an employee, such as receiving an annual salary, or a small business owner who may have employees but also carries out work for other clients independently or under an ABN .

Claiming If you’re an Australian resident for tax purposes, you can claim the tax-free threshold each income year.

If you earn more than $18,200 in the financial year (1 July to 30 June), you’ll have to pay tax on the amount over $18,200. The tax-free threshold is not available to non residents for tax purposes.

If you have more than one job and your combined income exceeds $18,200 you cannot claim the tax-free threshold from each of your payers.

How much tax do I pay when I earn more than one income?
If you have more than one payer at the same time, generally, you only claim the tax-free threshold from one payer.

Usually, you claim the tax-free threshold from the payer who pays you the highest salary or wage. Where you have more than one payer, you should advise your other payers to withhold tax from your income at a higher rate. This is the ‘no tax-free threshold’ rate. Doing this reduces the chance of you having a tax debt at the end of the income year.

For example:

if your main job is with Payer A and they pay you $1,500 each fortnight before tax, and you also earn $400 each fortnight as a casual employee for Payer B before tax, then:

Payer A will withhold tax from your total income ($1,900) as if there was no tax-free threshold because Payer B also pays you and they didn’t withhold any amount for the tax-free threshold.

Payer B will withhold tax from your total income ($1,900) as if there was no tax-free threshold because Payer A also pays you and they didn’t withhold any amount for the tax-free threshold.

Takeaway
If you are in fact claiming the tax-free threshold after all your normal deductions, as a salaried employee, you need to sit down with your employer and make sure they know to not take offset tax from your pay.

If you need help with tax advice, you can always contact us.

For more details about tax free threshold, visit the ATO website.