Tax Free Threshold

What does ‘Tax Free Threshold’ mean?

All Australian taxpayers who are residents for taxation purposes receive the first $18,200 of their income tax-free! This is what is known as the tax-free threshold.

So this means if you earn less than $18,200 within a given financial year, you won’t have to pay any tax on your income earned!

Income sources as defined by the ATO includes any money you have made during a financial year. Income sources can include earnings from an employer through salary for example plus business and sole trader income as well as any investment income such as rental income, bank interest or share trading and so on.

When you need to lodge

Over $18,200: When you earn over $18,200 you are obligated as an Australian taxpayer to lodge your tax return with the ATO each financial year. Your taxable income is offset by the tax-free threshold and whatever you make over this amount is taxed at the marginal tax rate set out by the ATO, refer below:

2018-2019 Tax rates

0- $18,200                       Nil

$18,201 – $37,000           19c for every $1 over $18,200

$37,001 – $90,000          $3,572 + 32.5c for every $1 over $37,000

$90,001 – $180,000        $20,797 + 37c for every $1 over $90,000

$180,001 and over           $54,097 + 45c for every $1 over $180,000

Under $18,200 but you have paid tax: if you earned income within the tax-free threshold, you should lodge a tax return as you are eligible for a full refund on the tax you paid during the year! Click here to start your tax return now.  

When you don’t need to lodge

Under $18,200 and paid nil tax: The good news is if you fall under this category you may not need to lodge a tax return for the given financial year you earned less than $18,200.  You may still be required to lodge a RNN ‘Return not Necessary’

Return Not Necessary- What is it?

You can advise the ATO that you are not required to lodge a tax return for the given financial year or that further returns are not necessary if you fall within the tax-free threshold. It is recommended that you lodge a RNN with the ATO to ensure the ATO update their records and therefore avoid any unnecessary compliance issues that could take place with an overdue tax return in their books.

Do you have more than one salary income?

If you have more than one income source during the same financial year with a combined income over $18,200, it is essential that you fill in the correct details when you complete your Tax File Number Declaration form from your new employer upon starting your new job.

Ensure that you only claim the tax-free threshold from one employer and that it is from the employer which you earn the most income from during the given financial year. For all other employers be sure to advise that you wish not to claim the tax-free threshold, this way it avoids any nasty surprises of a tax payable result come tax time due to being undertaxed during the financial year.

Payable tax return result

What to do if your tax return results in a tax payable and you can’t pay the full amount by the due date? Well there’s no reason to worry! Setting up a payment plan will help you avoid any penalties and shows the ATO you have good intentions on paying your outstanding tax debt in due course.

The ATO provides an option whereby Australian taxpayers may apply for a payment arrangement over a maximum 21-month period to pay off any outstanding tax debt. The payment plan can be set up in weekly, fortnightly or monthly instalments, which is great. So there is no reason to hold off on your outstanding tax return(s)!

Ready to get your tax return sorted?

Ezytaxback can help, simply click here to complete your tax return online today!



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