Confused about whether to claim the tax-free threshold in Australia?
- Sadiksha Subedi
- Aug 4
- 3 min read
You’re not alone. It’s one of the most searched tax topics every year, and for good reason, it directly affects how much tax is withheld from your paycheck and what refund you’ll get.
In this guide, we break down exactly what the tax-free threshold means, when you should (or shouldn’t) claim it, and how it impacts people with second jobs or short-term work. We’ll also show you how to estimate your refund using our free tax calculator.
What Is the Tax-Free Threshold?
The tax-free threshold is the amount of income you can earn without paying tax in Australia. As of 2025, it’s $18,200. That means if you earn less than this amount during the financial year, you won’t pay any income tax.
You’re eligible to claim the tax-free threshold if you’re an Australian resident for tax purposes, including:
International students
Part-time workers
Casual employees
Freelancers or gig workers earning under the threshold
Claiming vs Not Claiming the Tax-Free Threshold
Should You Claim the Tax-Free Threshold?
Yes, if this is your main or only job, and you expect to earn less than $18,200, or you want to receive more in your take-home pay throughout the year.
What Happens If You Don’t Claim It?
Your employer withholds more tax from your pay. This is not a bad thing; in fact, many people prefer it because it means a larger tax refund at the end of the financial year.
Tax-Free Threshold Claimed Meaning
When you "claim" the threshold, you’re telling your employer to apply the $18,200 exemption to your income via the TFN Declaration form. Only one employer can use this at a time.
Tax-Free Threshold and Second Jobs
If you have more than one job, you should only claim the tax-free threshold at your main job. Your second employer will withhold tax at a higher rate, and that’s intentional. It helps prevent underpayment and surprise tax bills later.
Example:
Main job: claim the threshold → lower withholding
Second job: don’t claim → higher withholding → smoother tax return
You still receive the full $18,200 benefit when lodging your tax return; it just can’t be split across employers.
If you have more than one job, you should only claim the tax-free threshold at your main job. Your second employer will withhold tax at a higher rate, and that’s intentional. It helps prevent underpayment and surprise tax bills later.
Example:
Main job: claim the threshold → lower withholding
Second job: don’t claim → higher withholding → smoother tax return
You still receive the full $18,200 benefit when lodging your tax return; it just can’t be split across employers.
Try the Tax-Free Threshold Calculator
Want to compare claiming vs not claiming? Use Precent’s free tax calculator to:
Estimate your total refund
See the tax withheld with or without claiming
Test different income scenarios
It’s fast, secure, and doesn’t require MyGov.
Need Help Deciding?
Click below to estimate your refund based on your job, income, and whether or not you claimed the threshold.
What If I Claimed It on Two Jobs by Mistake?
It happens. You won’t be fined, but you might owe some tax if too little was withheld.
Here’s what to do:
Let one employer know and submit a new TFN declaration
Lodge your tax return as normal, and the ATO will calculate what you owe or get back
Confused about how to fix it? We can help you lodge correctly and avoid unexpected bills.
Final Checklist: Should You Claim the Tax-Free Threshold?
This is your main job
You’re an Australian resident for tax purposes
Your income is under $18,200
You haven’t claimed it elsewhere this year
If you’re unsure, it’s safer not to claim and simply adjust at tax time using Precent.
FAQs About the Tax-Free Threshold (2025)
What is the tax-free threshold in 2025?
$18,200 is the amount of income you can earn without paying tax.
Should I claim it if I have two jobs?
Claim it on your main job only.
What happens if I don’t claim the threshold?
More tax is withheld, but you’ll usually get a refund.
What does “claimed” mean?
You told your employer (via TFN declaration) to apply the tax-free amount to your income.
Start Now: Estimate Your Tax Refund
Don’t guess, calculate your tax with confidence. Use Precent’s tools below to get started today!