The tax-free threshold is the amount of income you can earn before paying income tax. For 2025–26 it is $18,200. Claiming it reduces the PAYG withheld from your primary job, lifting your take-home pay.
What is the tax-free threshold? It’s the first $18,200 of your income taxed at 0%. Above that, progressive rates apply: 16%, 30%, 37%, 45% across the 2025–26 resident brackets.
When should you claim it? Typically with your main employer so your regular pay reflects the threshold. If you have multiple jobs, you usually claim it with only one employer to avoid under-withholding.
What happens if you don’t claim it? Your employer withholds more tax during the year. You may get a refund after your tax return, but your regular take-home is lower in the meantime.
Why your employer asks on the TFN declaration: They need to know whether to apply the threshold to your payments to withhold the right amount of PAYG.
How this calculator uses the tax-free threshold toggle: Turning it on applies the $18,200 tax-free band and the progressive brackets above it; turning it off applies marginal rates from the first dollar. The Medicare levy is applied in this calculator when the threshold toggle is on.
Quick FAQ: Should I claim it on two jobs? Usually no—only one employer. What if I switch jobs? Claim it with your primary job. Does it change my Medicare levy here? In this simplified model, Medicare is applied when the threshold toggle is on.
Call to action: Use the main calculator to compare with and without the tax-free threshold, and see the Medicare levy impact. You can also read the Medicare levy explainer for more context.