What is the tax-free threshold
If you're an Australian resident for tax purposes for a full year, you pay no tax on the first $18,200 of your income. This is called the tax-free threshold.
Adjusted tax-free threshold
If you entered with the intention of residing in Australia during the income year, your tax-free threshold will be adjusted. Your tax-free threshold will be lower than the full year’s threshold available to most resident taxpayers.
Your adjusted tax-free threshold has 2 components:
- a flat amount of $13,464
- an additional $4,736 – apportioned for the number of months you were in Australia during the income year, including the month you arrived.
The Australian income year runs from 1 July to 30 June the following year. You need to calculate the number of months from the month you arrived until 30 June, the end of the income year.
Example of part-year resident tax-free threshold
Example: tax-free threshold for part year resident
John became an Australian resident on 17 April this year. This means he has been in Australia for 3 of the 12 months in the income year.
His tax-free threshold is:
= $13,464 + (($4,736 × 3) ÷ 12)
= $13,464 + $1,184
= $14,648
This means John won't pay tax on the first $14,648 of his taxable income for the income year. For any taxable income over $14,648, he will start to pay tax at the rate of 19%. The thresholds for the other tax rates will not change.
As John had a lower tax-free threshold than a resident for a full year, he will pay more tax on the same income if his taxable income exceeds $14,648. This only happens once. For subsequent years, John is a resident for the full year and is entitled to the full tax-free threshold.
End of example