One of the great things about being an Australian taxpayer is that you can claim a tax-free threshold on your taxes. This means that you don’t have to pay any taxes on the first $18,200 of your annual income. That’s a significant chunk of change that you can keep in your pocket! For more information, click on do I want to claim tax-free threshold?
What Is The Tax-Free Threshold?
The tax-free threshold is a certain amount of income that is exempt from taxation. It is the income level below which you are not required to pay any income tax. In Australia, as of the 2019-2020 financial year, the tax-free threshold is currently $18,200. This means that if your annual income is less than $18,200, you will not have to pay any income tax.
If you are a low-income earner, you may also be eligible for the Low Income Tax Offset (LITO). This is a government subsidy that can further reduce the amount of taxes you have to pay. To find out more about the LITO and how to claim it, visit the ATO website.
If your annual income is above the tax-free threshold, you will need to pay income tax on the portion of your income that exceeds the threshold. The amount of tax you pay will depend on your marginal tax rate. Marginal tax rates are the rates of tax that apply to each additional dollar of income earned.
For example, if your annual income is between $18,201 and $37,000, you will be taxed at a rate of 19c for every dollar you earn over $18,200. This is known as the ‘marginal tax rate’. Or if your annual income is over $37,000, you will be taxed at a rate of 32.5c for every dollar you earn over $37,000. This is known as the ‘marginal tax rate’ still.
How To Claim Tax-Free Threshold?
If you’re not sure how to claim the tax-free threshold, don’t worry – it’s quite simple.
You can claim the tax-free threshold when you lodge your tax return. If you are eligible for the tax-free threshold, you will need to indicate this on your tax return. You can do this by ticking the box labelled ‘Tax-free threshold’ on your tax return form.
To claim the tax-free threshold, you need to fill out a Tax File Number Declaration form and submit it to the Australian Taxation Office (ATO). If you are an Australian resident for tax purposes, you can also claim the tax-free threshold if you are working overseas for part of the financial year. All you need to do is fill out a tax return and include the relevant paperwork. The ATO (Australian Tax Office) will then process your return and refund you the appropriate amount of money.
If you are not eligible for the tax-free threshold (for example, if you are a non-resident), you will not be able to tick the ‘Tax-free threshold’ box on your tax return form.
It’s important to note that the tax-free threshold is only available to Australian residents who are 18 years of age or older. If you’re a non-resident or a minor, you won’t be able to claim this particular tax break.
The tax-free threshold is an important part of the Australian taxation system and can save you a significant amount of money if your annual income is below the threshold. If you are unsure about whether or not you are eligible to claim the tax-free threshold, speak to a registered tax agent or accountant for advice.
So there you have it – everything you need to know about the tax-free threshold in Australia. Be sure to take advantage of this fantastic opportunity and keep more of your hard-earned money in your pocket!
If you have any further questions about the tax-free threshold, or how to claim it, please contact the Australian Taxation Office (ATO).