Tax-Free Threshold 2026-27: Should You Claim It?

By Narelle Hartigan, CPAPublished 17 June 2026Updated 5 July 202611 min read

Claim the tax-free threshold from one employer, your main one, and answer no everywhere else. The threshold makes the first $18,200 you earn each year tax free, but it exists once per person, not once per job. Claim it twice and both employers under-withhold, which surfaces as a tax bill after you lodge.

This guide gives you the decision rules first, then the definition, the second-job numbers in real 2026-27 dollars, and the paperwork for changing your answer mid-year. It sits in our PAYG guides alongside the withholding system it plugs into.

Jump to:Should you claim it?What the tax-free threshold meansHow much is it?Second job: the dollar differenceThe second-job rulesChanging your choice mid-yearIf you claim it twicePart-year residents and job changes5 threshold mistakes to avoidFAQSources

Key takeaways

  • The tax-free threshold is $18,200 for 2026-27, unchanged on 1 July. The ATO's per-pay equivalents are $350 a week, $700 a fortnight, $1,517 a month.
  • Claim it with your main employer only. On a second job, tax is withheld at the no-threshold rate, 15% from the first dollar in 2026-27.
  • Not claiming it on a $45,000 job means about $2,730 more withheld across the year, roughly $105 per fortnight.
  • The choice changes withholding timing only, never your final tax. Over-withheld amounts come back as a refund at assessment.
  • Change your answer any time by giving your employer a withholding declaration (NAT 3093), paper or through myGov. It applies from the next payment after you hand it in.
  • Claiming it on two jobs at once is the most common cause of surprise tax bills. On a $45,000 plus $30,000 combination it leaves about $8,656 owing at lodgment.

Should you claim the tax-free threshold?

For most people the answer takes one sentence: yes at your main job, no everywhere else. The full rules:

Claim it when

  • It is your only job or payer
  • It is the highest-paying of your several jobs
  • You are a resident and your total income from all sources will stay under $18,200 (the ATO allows claiming from every payer in that case)
  • You changed jobs and this is the new employer, even if the old one had it earlier this year

Don't claim it when

  • A second or lower-paying job, while the main job claims it
  • You are a foreign resident for tax purposes
  • You are a working holiday maker on a 417 or 462 visa (the form requires a no)
  • A taxable Centrelink payment already claims it for you and you take a job on top

The claim itself happens on the TFN declaration you complete when starting a payer, question by question; the TFN declaration guide walks the form.

What the tax-free threshold means

The tax-free threshold is the first slice of the resident rate scale: income up to $18,200 is taxed at 0% for 2026-27, before the 15% rate starts. Earn under it for the year and you pay no income tax at all. Earn above it and only the excess is taxed, at the rates on the 2026-27 tax brackets page.

On the payroll side, "claiming" the threshold tells your employer which withholding scale to use. Claiming spreads the $18,200 of tax-free room across your pays, so a chunk of every payslip escapes withholding. Not claiming uses the scale that starts at 15% from the first dollar. Either way your final tax is identical; the claim only decides how much is collected along the way, as part of the machinery described in the PAYG withholding guide.

How much is the tax-free threshold?

$18,200 a year, a figure that has not moved since 2012 and did not move on 1 July 2026 (the July change was the 16% rate falling to 15%, not the threshold). The ATO expresses it per pay period as $350 a week, $700 a fortnight or $1,517 a month. In practice, withholding for someone claiming the threshold starts a little higher, from about $363 a week or $726 a fortnight, because the low income tax offset is built into the scale and extends the tax-free zone.

Second job: the dollar difference at 3 wage levels

What the choice is actually worth. Annualised 2026-27 withholding on the same wage with the threshold claimed versus not claimed, resident, no HELP debt:

Annual wageWithheld, threshold claimedWithheld, not claimedGap per yearGap per fortnight
$18,000$0$2,000$2,000$77
$30,000$1,269$3,999$2,730$105
$45,000$4,595$7,325$2,730$105
Swipe right →

Annual 2026-27 figures from our tax engine, spread over 26 fortnights. ATO per-pay schedules round to whole dollars, so payslip amounts differ slightly.

The gap tops out around $2,730 a year because it is simply the tax on the $18,200 slice. Notice what the table does not show: any change in total tax. The not-claimed column is the same money arriving at the ATO earlier, refunded after lodgment if it overshoots. To model your own job combination, including HELP debts, run the second job tax calculator.

The second-job rules

The ATO's instruction for multiple payers: claim the threshold from the payer who pays you the most, and have every other payer withhold at the no-threshold rate. That split exists because withholding scales assume each job is your only one. Two employers both applying the tax-free scale would each shelter $18,200 of annualised pay, and there is only one $18,200 to shelter.

One nuance worth knowing: the no-threshold rate on a modest second job can still under-collect when your combined income pushes into the 30% bracket, because the second scale starts at 15%. If both jobs are substantial, an upward variation asking one payer to withhold extra is the clean fix, and the ATO provides exactly that mechanism. How the two scales translate into per-pay maths is covered in how PAYG is calculated.

How to change your choice mid-year

You are not locked in until June. To start or stop claiming the threshold with an employer you already work for, give them a withholding declaration (NAT 3093). The same form updates residency changes, HELP debt status and offset claims.

  1. Complete it online or on paper. The fast path is ATO online services through myGov, under Employment, or download the PDF and hand it to payroll.
  2. It takes effect from payments made after you provide it. There is no backdating; earlier pays stay as withheld.
  3. A new declaration overrides the old one. Your employer keeps the form on file; it is not sent to the ATO.

Typical mid-year switches: your second job becomes your main job (swap which employer claims it), you drop from two jobs to one, or your total income falls and you want to claim it from each payer while staying under $18,200.

What happens if you claim it twice

Nothing dramatic on payday, which is the trap. Both jobs withhold at the generous scale, take-home pay looks great all year, and the reconciliation arrives with the notice of assessment.

$45,000 main job + $30,000 second job, 2026-27

Actual tax and Medicare on $75,000 combinedwhat the assessment will require$14,520
Withheld if both jobs claim the threshold$4,595 + $1,269$5,864
Tax bill at lodgment$8,656
Withheld with the correct setupsecond job on the no-threshold scale$8,594
Remaining shortfall even when set up correctly$5,926

Claiming twice is not an offence and there is no fine for the declaration itself; the debt is simply the tax that should have been collected, payable by the due date on your assessment. The fix is a withholding declaration to the second employer, ideally the week the second job starts. The residual shortfall in the last row is the 15%-versus-30% effect from the previous section, which is what upward variations exist for.

Part-year residents and job changes

Arrive in Australia partway through 2026-27 and the threshold is pro-rated: a flat $13,464 plus up to $4,736 scaled by the months you were resident, counting the arrival month. Full-year non-residents get no threshold at all and pay tax from the first dollar.

Changing jobs is friendlier: the threshold follows you. When the old employer stops paying you, claim it from the new one immediately, even though both employers will have applied it in the same year. What matters is not claiming it from two payers at the same time. Your total withholding across both jobs still reconciles at assessment through your income statements, and you can check the running figures any time in myGov with the PAYG calculator as the comparison point.

5 threshold mistakes to avoid

  1. Claiming it on both jobs because take-home looked low

    The extra cash each fortnight is borrowed from your own assessment. On $75,000 across two jobs it becomes a $8,656 bill in July.

  2. Not claiming it anywhere

    Some workers tick no on their only job to force a big refund. It works, but it is an interest-free loan to the ATO of about $2,730 a year on a $30,000 wage.

  3. Forgetting to update after dropping to one job

    Leave the surviving job on the no-threshold scale and every pay is over-withheld until you lodge. A two-minute withholding declaration fixes it from the next pay.

  4. Claiming it as a working holiday maker or foreign resident

    Neither is entitled. The declaration instructions require a no, and an incorrect yes leads to under-withholding the assessment claws back.

  5. Confusing the threshold with LITO

    They stack, but they are different things: the threshold is a 0% bracket you claim on a form; the low income tax offset is applied automatically at assessment with no paperwork at all.

Frequently asked questions

What does tax free threshold mean?
It is the first $18,200 of income each financial year that residents pay no tax on, the 0% bracket at the bottom of the rate scale. Claiming it on your TFN declaration tells your employer to leave that slice out of withholding.
Should I claim the tax free threshold?
Yes at your only or main job. No at second and later jobs, unless your total income from every source will stay under $18,200 for the year, in which case the ATO lets you claim it from each payer.
How much is the tax free threshold?
For 2026-27 it is $18,200 a year, which the ATO expresses as $350 a week, $700 a fortnight or $1,517 a month. It was not changed by the 1 July 2026 tax cut, which lowered the 16% rate to 15% instead.
What is the tax free threshold in Australia?
The amount a resident can earn before income tax applies: $18,200. Foreign residents get no threshold, working holiday makers are taxed at 15% from the first dollar under their own scale, and part-year residents get a pro-rated amount from $13,464.
What happens if I do not claim the tax free threshold?
Your employer withholds at 15% from the first dollar, so each pay is smaller, and the extra comes back as a refund after you lodge. On a $30,000 wage that is roughly $105 a fortnight parked with the ATO until assessment.
Do I pay tax if I earn less than $18,200?
No income tax for the year. If a payer withheld anything, for instance because you did not claim the threshold, the full amount comes back as a refund once you lodge a return.
Can I claim the tax free threshold on Centrelink payments and a job?
Taxable payments such as JobSeeker usually already claim the threshold as your first payer. Take a job on top and the job should generally run on the no-threshold scale, or you will be claiming it twice.
Is claiming the tax free threshold twice illegal?
It is not an offence, and it is legitimate while your total income stays under $18,200. Above that it just means under-withholding, which returns as a tax bill with your assessment rather than a penalty.

Sources

Related resources

Calculator

Second Job Tax Calculator

Both jobs, both scales, one combined answer

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Guide

PAYG Withholding

The system your threshold choice plugs into

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Rates

Tax Brackets 2026-27

The full scale above the tax-free slice

Open →
Narelle Hartigan
Narelle Hartigan, CPA Verified Expert
Tax Accountant & PAYG Specialist

Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.

CPABCom (Accounting)
Published: 17 June 2026 · Updated: 5 July 2026