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Tax-Free Threshold
The tax free threshold helps determine how much tax you pay, and whether you need to lodge a tax return or a non-lodgement advice.
What does “tax-free threshold” mean?
The tax-free threshold functions as a "beginning amount" for your personal earnings or revenue that is not subject to tax.
You don’t have to pay any income tax to the ATO if your total income is below the tax-free level.
The ATO’s definition of your “income” is the total of any money you earned from all jobs and other sources. This includes interest you received for bank savings plus income from any investments. Your income also includes any consulting, contracting, or side jobs.
If you earned less than the tax-free threshold but some taxes were deducted or withheld from your income, you will probably get back all of the tax that was deducted, in your tax refund, after you lodge your tax return.
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Important Dates and Tax Deadlines
2022 Tax Return
For your income between
01 July 2021 – 30 June 2022
2021 Tax Return
For your income between
01 July 2020 – 30 June 2021
All Other Years
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How much is the tax-free threshold for 2022?
The tax-free threshold is
$18,200.
Note: This is the same for overdue 2021, 2020, 2019, 2018 or 2017 returns.
Do I need to lodge a tax return?
In general, you won’t have to pay income tax to the ATO if your income is below the tax-free level. You do not file a tax return either, although there are certain unusual circumstances that are covered in instances 1 and 2 below. You may sometimes need to file a tax return in order to recover part of the taxes you paid back. You must submit a “non-lodgement advise” to the ATO even if you don’t lodge a tax return. Itaxonline offers free assistance with that.
You must definitely file a tax return if your income exceeds the tax-free level. How much you earned above the tax-free threshold determines how much of your income is subject to tax. The amount of tax you owe is not determined by a straightforward percentage; rather, the ATO has developed a more complicated mathematical formula that yet functions in a straightforward manner.
Tax-free threshold – Examples
Let’s dissect the tax-free threshold using some real-world instances. These three typical scenarios demonstrate whether or not you must file a tax return. Additionally, the ATO still requires that you file a “Non-Lodgement Advice” even if you don’t need to file a return; we’ll discuss that later. (Itaxonline will take care of it for you without charging you; many tax agents impose costs for non-lodgement.)
Example 1
You earned more than $18,200
You must lodge a tax return.
If during the past financial year your taxable income was more than $18,200 you are required to lodge a tax return.
Fit into this category and ready to start now? Click here to get going and you could be done is 15 minutes!
Example 2
You earned less than $18,200, but paid tax on your income
You must lodge a tax return, to get back the taxes you paid.
Even though you earned under the new tax-free threshold, as you paid tax on your income during the year, you should lodge a tax return.
In this situation, it’s likely you may get all of the tax you paid throughout the year back after you lodge your tax return.
Want that money in your account as soon as possible? Click here to start your tax return now.
Example 2
You earned less than $18,200 and paid no tax on your income
You might not need to lodge a tax return.
Good news! If you earned less than $18,200 AND you didn’t pay any tax on this income, then you may not be required to lodge a tax return this year.
In most cases, if you fall into example 3, then you won’t need to lodge a return
However, you may still need to lodge a tax return if you:
- are entitled to the private health insurance rebate
- had a reportable fringe benefits amount on your PAYG Summary
- had a reportable employer superannuation contribution on your PAYG Summary
- made a loss or can claim a loss made in a previous year
- were an Australian resident for tax purposes and you had exempt foreign employment income plus $1 or more of other income
Does example 3 apply to you?
If you don’t need to lodge a tax return this year, you should still lodge a ‘Non-Lodgement Advice’.
What is a Non-Lodgement Advice?
Don’t need to lodge a tax return this year? That does not mean you can just forget about it – you can’t ignore the ATO. You need to submit non-lodgement advice instead. This document explains to the ATO that you do not need to lodge this year and ensures they don’t list you as having an outstanding return that still needs to be lodged.
Need to use our non-lodgement advice service?
To take advantage of this service, simply register online at itaxonline.com.au and fill in your income, deductions, and details. Our accountants will then match your details with ATO records and if you don’t need to lodge a tax return, we’ll submit non-lodgement advice on your behalf, for free.