Australian Tax-Free Threshold 2026–27

What the tax-free threshold means

Australian resident individual tax rates are progressive. In 2026–27, the first $18,200 of annual taxable income is taxed at 0%. Income above that amount moves through the higher marginal brackets, with each rate applying only to the income inside that bracket.

Taxable income is generally assessable income minus allowable deductions. The threshold applies to that annual taxable-income figure, not separately to every payslip, employer or source of income.

Claiming it through your employer

Employees tell a payer whether they want to claim the tax-free threshold when completing their tax file number declaration. Claiming it changes PAYG withholding during the year; it does not change the final resident tax brackets used when all annual income is assessed.

The tax withheld from each pay is a prepayment towards your end-of-year liability. Your tax return combines taxable income and withholding from all sources, then works out whether you have a refund or an amount to pay.

Tax-free threshold with two jobs

If you have two or more payers at the same time, the ATO says you generally claim the threshold from only one—usually the payer providing the highest salary or wage. Other payers normally withhold without applying the threshold, which can make the tax taken from a second job look comparatively high.

A second job is not placed into its own special final tax bracket. All taxable income is combined for the year. If total withholding is too low, you may receive a tax bill; if it is too high, the excess may be refunded after assessment.

Worked example at $60,000

For a resident with $60,000 taxable income in 2026–27, the first $18,200 is taxed at 0%, the next $26,800 is taxed at 15% ($4,020), and the remaining $15,000 is taxed at 30% ($4,500). That gives $8,520 of resident income tax before offsets and the Medicare levy.

This is why earning more than $18,200 does not make the whole $60,000 taxable at 15% or 30%. Only the portions inside each band receive those rates.

Who may not receive the full threshold

The full threshold applies to Australian residents for tax purposes for the full income year. Foreign residents generally do not receive it, while people who become or cease to be residents during the year can have a part-year threshold. Tax residency is separate from citizenship or visa status and depends on the tax-law residency tests.

Frequently asked questions