What is the tax free threshold?
The 2016 individual tax free threshold is $18,200. The tax free threshold is like an un-taxed “starting amount” for your personal income or earnings.
(Remember that your income is the total of money you earned from different sources, including any interest you received for bank savings and income from any investments.)
If you earn less than the tax free threshold, generally you won’t pay income tax to the ATO and you won’t need to lodge a tax return – but there are some special details explained below in examples 1 and 2. Sometimes you may need to lodge a tax return to get back tax money you paid. Even if you don’t lodge a tax return, the ATO requires you to submit a “non-lodgement advice” and etax.com.au will help you do that, for free.
If you earn more than the tax free threshold, you need to lodge a tax return. Your income tax will be calculated based on how much money you made above the tax-free threshold, and the rate or portion of your income that becomes ATO income tax varies. As your income increases more and more above the tax free threshold, you’ll pay more tax (both in total, and as a percentage of your income). The amount of tax you pay is not calculated by a simple percentage – it is a more complex mathematical formula set out by the ATO, but it works in a fairly simple way.
Let’s break down the tax-free threshold with some examples. These three common cases help show whether or not you need to lodge a tax return. Plus, we’ll tell you about the new and free Non Lodgement Advice Service from Etax Accountants.
You earned more than $18,200
You must lodge a tax return.
If during the past financial year your taxable income was more than $18,200 you are required to lodge a tax return.
Fit into this category and ready to start now? Click here to get going and you could be done is 15 minutes!
You earned less than $18,200, but paid tax on your income
You must lodge a tax return.
Even though you earned under the new tax free threshold, as you paid tax on your income during the year, you should lodge a tax return.
In this situation it’s likely you may get all of the tax you paid throughout the year back on your tax return.
Want that money in your account as soon as possible? Click here to start your tax return now.
You earned less than $18,200 and paid no tax on your income
You might not need to lodge a tax return.
If you earned less than $18,200 AND you didn’t pay any tax on this income, then you may not be required to lodge a tax return this year.
In most cases if you fall into scenario 3, then you won’t need to lodge a return. However you may still need to lodge if:
- You are entitled to the private health insurance rebate
- You had a reportable fringe benefits amount on your PAYG Summary
- You had a reportable employer superannuation contribution on your PAYG Summary
- You made a loss or can claim a loss made in a previous year
- You were an Australian resident for tax purposes and you had exempt foreign employment income plus $1 or more of other income
Does example 3 apply to you?
If you don’t need to lodge a tax return this year…
You still have to do something important.
Etax.com.au Non Lodgement Advice Service
Don’t need to lodge a tax return this year? That does not mean you can just forget about it – you can’t ignore the ATO. You need to submit a non-lodgement advice instead. This document explains to the ATO that you do not need to lodge this year and ensures they don’t list you as having an outstanding return which still needs to be lodged.
To help clients who need to submit non-lodgement advice this year, we launched the Etax.com.au non-lodgement advice service. And the best part – it’s free!
To take advantage of this service, simply register online at Etax.com.au and fill in your income, deductions and details. Our accountants will then match your details with ATO records and if you don’t need to lodge a tax return, we’ll submit a non-lodgement advice on your behalf, for free.