Tax-Free Threshold Australia 2025: New Rules & Pay Benefits

Australians love a good pay boost—and the tax-free threshold is one of the simplest ways to keep more of your hard-earned dollars. With updated tax policies coming into effect for the 2024–25 financial year, understanding the ins and outs of the tax-free threshold is more valuable than ever. Whether you’re a first-time worker or a seasoned employee, knowing how to leverage the threshold can make a real difference to your bank balance.

What Is the Tax-Free Threshold?

The tax-free threshold is the amount of income you can earn each financial year without paying any tax. For most Australians, this threshold is set at $18,200, and it’s the cornerstone of the country’s progressive tax system. If you claim the threshold with your employer, less tax is withheld from your pay, giving you a higher net income week to week.

• 2025 update: The threshold remains at $18,200 for the 2024–25 financial year, but income tax bracket adjustments mean more workers are set to benefit from the broader tax cuts that kick in from 1 July 2024.
• Who can claim? Australian residents for tax purposes are eligible. If you’re a part-year resident or working holiday maker, special rules apply.
• How does it work? Simply fill out a TFN Declaration form and indicate you want to claim the threshold with your main employer.

2025 Policy Updates: What’s Changed?

The tax-free threshold itself hasn’t budged, but sweeping changes to tax rates in 2025 will have a ripple effect on take-home pay. The revised Stage 3 tax cuts, passed in early 2024, reduce the marginal tax rates for millions of Australians while keeping the threshold steady at $18,200. Here’s what you need to know:

• The second tax bracket now kicks in at $18,201, with a lower marginal rate than previous years.
• Higher-income earners see the most significant tax rate drops, but every taxpayer who claims the threshold benefits from the first $18,200 being tax-free.
• Temporary residents and working holiday makers are still taxed differently, so check your eligibility before claiming.

Real-world example: If you earn $60,000 a year and claim the tax-free threshold, you pay tax only on $41,800. With the 2025 tax rates, you’ll see more in your pay packet compared to previous years—potentially saving hundreds per year thanks to the combined impact of the threshold and lower rates.

Claiming the Tax-Free Threshold: Strategies & Pitfalls

To get the most from the tax-free threshold, it’s crucial to claim it with the right employer—usually the one who pays you the most. Claiming it with multiple employers can lead to a tax bill at the end of the year, so avoid double-dipping. Here’s how to stay on track:

• One job? Easy. Claim the threshold with your employer on your TFN Declaration.
• Multiple jobs? Claim the threshold with your primary employer only. The others will withhold tax at a higher rate to prevent underpayment.
• Changed jobs mid-year? Update your TFN Declaration with your new employer and ensure the previous one knows you’re no longer claiming the threshold.

For students, retirees returning to the workforce, or casual workers juggling multiple gigs, this becomes especially important. Overclaiming can result in a tax debt, while underclaiming means you’re giving the ATO an interest-free loan until tax time.

Making the Most of Your Tax-Free Threshold in 2025

With the cost of living still a major concern for Australians, every dollar counts. The tax-free threshold remains a key lever for boosting your weekly income. Combined with the 2025 tax cuts, it’s more valuable than ever to ensure you’re set up correctly—especially if you’ve changed jobs, have multiple sources of income, or are new to the workforce.

• Check your latest payslip to confirm your employer is applying the threshold.
• If you’ve taken on a side hustle, don’t claim the threshold twice.
• Keep your details up to date with the ATO to avoid tax time surprises.

Looking ahead, while the tax-free threshold is unchanged for 2025, it remains at the heart of Australia’s tax system, ensuring low- and middle-income earners keep more of what they earn. For many, it’s the simplest and most effective way to maximise take-home pay—no complex strategies required.