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  • Tax-free threshold for newcomers to Australia

    Did you arrive with the intention to reside in Australia this year?

    If you are 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.

    If you entered with the intention of residing in Australia during the financial 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 two 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 financial 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 – 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 three of the twelve 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 will not 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
      Last modified: 14 Jun 2022QC 17287