What does “tax free threshold” mean?
The tax free threshold is the amount of money you can earn each year before you have to start paying tax.
If your total income for the year is less than the tax free threshold, you don’t have to pay any income tax to the ATO.
The ATO’s definition of your “income” is the total of any money you earned from all jobs and other income sources. This includes interest you received from bank savings, plus income from any investments (like shares or any other capital gains). Your income also includes any consulting, contracting or side-jobs.
If you earned less than the tax free threshold but tax was deducted or withheld from your income, make sure you still do a tax return, as you should get all the tax you paid during the year back as your tax refund!
What is the tax free threshold for 2024?
The tax free threshold is
$18,200.
Note: This is the same for overdue 2017-23 returns.
Do I need to lodge a tax return?
If you earn more than the tax free threshold, you definitely need to lodge a tax return. Your income tax is calculated on how much money you made above the tax free threshold. The amount of tax you pay is not calculated by a simple percentage. It’s a more complex mathematical formula set out by the ATO, but it works in a fairly simple way. We have more details about this on our income tax rates page.
If you earn less than the tax free threshold, whether you need to lodge a tax return depends on if you paid any tax during the year. You should always do a tax return if you have paid tax. If you didn’t pay tax, then it’s likely you won’t need to do a tax return. We go into more detail about these situations in examples 2 and 3 below.
Important: If you don’t need to lodge a tax return, you must send the ATO a “non-lodgement advice” instead. Etax can help you with that, for free. If you don’t, the ATO will follow you up and you might receive a fine.
Tax free threshold – Examples
Let’s break down the tax free threshold with some examples. These three common cases help show whether or not you need to lodge a tax return or a non-lodgement advice.
Example 1
You earned more than $18,200 during the financial year (between 1 July and 30 June the following year).
You must lodge a tax return.
If your taxable income was more than $18,200 during the year you are required to lodge a tax return. This is because when you hit the threshold, you are required to start paying tax.
Fit into this category and ready to start now? Click here to get going and you could be done in 15 minutes!
Example 2
You earned less than $18,200, but paid tax on your income.
You must lodge a tax return to get back the taxes you paid.
Even though you earned under the tax free threshold, since you paid tax on your income during the year, you should lodge a tax return.
In this situation, it’s likely you’ll get all of the tax you paid throughout the year back after you lodge your tax return.
Want that money in your account as soon as possible? Click here to start your tax return now.
Example 3
You earned less than $18,200 and paid no tax on your income.
You might not need to lodge a tax return.
Good news! If you earned less than $18,200 AND you didn’t pay any tax on this income, then you probably won’t need to lodge a tax return this year.
In most cases if you fall into example 3, you won’t need to lodge a return, BUT you still need to do a ‘Non Lodgement Advice’.
However, you may still need to lodge a tax return if you:
- are entitled to the private health insurance rebate
- had a reportable fringe benefits amount on your PAYG Summary/income statement
- had a reportable employer superannuation contribution on your PAYG Summary
- made a capital loss or can claim a loss made in a previous year
- were an Australian resident for tax purposes and you had exempt foreign employment income plus $1 or more of other income
- are required to lodge a tax return by another government body like Centrelink.
Does example 3 apply to you?
If you don’t need to lodge a tax return this year, you should still lodge a ‘Non Lodgement Advice’.
What is a Non Lodgement Advice?
You can’t just forget about your taxes and do nothing if you don’t need a tax return this year. You need to submit a non-lodgement advice (NLA) instead. This document explains to the ATO that you don’t need to lodge this year and ensures they don’t list you as having an outstanding return, which still needs to be lodged. If you don’t lodge an NLA, the ATO will follow you up and you might receive a fine.
To help clients who need to submit a non-lodgement advice this year, we launched the Etax.com.au non-lodgement advice service. And the best part? It’s free!
Need to use our non-lodgement advice service?
To take advantage of this service, simply register online at Etax.com.au and fill in your income, deductions and details. Our accountants will then match your details with ATO records and if you don’t need to lodge a tax return, we’ll submit a non-lodgement advice on your behalf, for free.
Ready to get it done?
Simply click here to get started now!
What happens if I don’t claim the tax free threshold?
If you don’t claim the tax free threshold, you will pay tax on all of the income you earn, that you aren’t required to pay.
But don’t worry, as long as you earned under the $18,200 threshold, you will get all of that tax back when you lodge a tax return. Even if you did earn over the threshold, you will get all of the tax you “overpaid” by lodging your tax return.
