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.
If you entered with the intention of residing in Australia duringthe 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 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 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 – 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
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