# The Tax-Free Threshold: Which Job to Claim It On

> What the tax-free threshold is, which job gets the yes on your TFN declaration, what happens at tax time if you claim it twice and how to change your answer.

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- Author: Marnix
- Published: 2026-09-16



The new job's onboarding form asks a question that can feel like a trick: "Do you want to claim the tax-free threshold from this payer?" If it's your only or highest-paying job, the answer is usually yes. Otherwise, it's usually no.

That one box decides how much tax comes out of every pay from that job, so it's worth a few minutes to get right. It doesn't change the tax you owe for the year, only when you pay it.

## One threshold for the whole year

If you're an Australian resident for tax purposes, the first $18,200 of your taxable income each financial year isn't taxed. That's the **tax-free threshold**. Our guide to [tax brackets](/blog/tax-brackets) explains the rates above the threshold.

There's one threshold per person per year, however many jobs you have. Your employers can't share it out between them, because neither sees what the other pays you. Ticking yes only tells that one employer to allow for the threshold when it takes tax out of your pay, which is called **withholding**.

Jordan, who's made up, is 19 and works two casual jobs: a café that pays $750 a fortnight and a supermarket that pays $250. Over 2026–27 that comes to $26,000.

| Jordan's 2026–27 income | Amount (AUD) |
| --- | ---: |
| Café | $19,500 |
| Supermarket | $6,500 |
| Total | $26,000 |
| Covered by the tax-free threshold | $18,200 |
| Taxed at 15 cents in the dollar | $7,800 |

One $18,200 for the whole year, whichever job the money came from. Jordan is made up. 2026–27 resident rates, before the low income tax offset.

The café pay alone is enough to use up the whole threshold, so every dollar from the supermarket is taxed.

## Give the yes to the job that pays most

Answer yes on the [TFN declaration](https://www.ato.gov.au/forms-and-instructions/tfn-declaration/paper-tfn-declaration-form-for-payees) for the job that pays you most, which is usually your main one, and no at any other. For Jordan, a yes at the café means $4 a fortnight is withheld there and $38 at the supermarket, $42 in all. Swap the answers and it's $134 a fortnight from the café and nothing from the supermarket, for exactly the same pay.

There isn't a separate "second job tax rate". The second employer simply withholds without allowing for the threshold, so more comes out of each dollar. Our guide to [take-home pay](/blog/take-home-pay) shows how withholding fits into the rest of your payslip.

You can say yes at every job in one case: when you're sure your total income for the year, from every payer, will be $18,200 or less. If a busier year pushes it over, switch one job to no.

A taxable Centrelink payment counts as a payer too. If you get JobSeeker Payment, Youth Allowance or Austudy, you're probably already claiming the threshold through it, so check which payer is using it before you answer on a new job's form. Our guide to [budgeting on JobSeeker](/blog/jobseeker-budget) covers how wages and the payment fit together.

## What tax time does with your answer

Withholding is only a running estimate. When you lodge your tax return, the tax office adds up everything you earned, works out the tax for the year and compares it with what your employers already sent. If more was withheld than you owe, the difference comes back as a refund. If less was withheld, you get a bill.

For Jordan, the tax on $26,000 in 2026–27 is $470. This assumes no Medicare levy and includes the [low income tax offset](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/low-income-tax-offset), a tax reduction applied automatically when you lodge. Here's how each way of answering compares with that $470 over the year.

| How Jordan answers | Tax withheld over 2026–27 (AUD) |
| --- | ---: |
| Yes at both jobs | $104 |
| Yes at the café only | $1,092 |
| Yes at the supermarket only | $3,484 |
| No at both jobs | $4,472 |

Jordan owes $470 for the year, assuming no Medicare levy. Less withheld than that leaves a bill; more leads to a refund. Jordan is made up; 2026–27 withholding schedules and rates.

A yes at both jobs feels like the best deal on payday, because almost nothing is withheld. It leaves $366 of the $470 to find in one go after you lodge. The usual answer, yes at the café only, withholds more than Jordan owes, and the extra comes back once the return is assessed. Our guide to [when your tax refund arrives](/blog/tax-refund-time) explains the timing.

If you'd rather keep more of each pay than wait for a refund, you can apply for a [PAYG withholding variation](https://www.ato.gov.au/forms-and-instructions/payg-withholding-variation-application) once you're confident of your income for the year. The tax office then tells your employers to withhold less.

## If you've already ticked the wrong box

You fix it with the employer, not on your tax return. Fill in a [withholding declaration](https://www.ato.gov.au/forms-and-instructions/withholding-declaration), the form for telling an employer that something on your TFN declaration has changed, and give it to them. You can complete it through myGov, then print the summary and give it to your employer, or use the paper form.

Changing jobs is simpler. When an old job stops paying you, it stops using your threshold, so you can say yes on the new job's TFN declaration even though the old one had it earlier in the year.

Switching one job to no changes future withholding. Before setting money aside, compare your estimated tax for the whole year with what's already withheld and what the remaining pays will withhold. If you get a bill, our guide to [a tax bill you can't pay in full](/blog/cant-pay-tax-bill) covers payment plans.

Clova is a budgeting app that helps you plan each pay, including money for tax time.

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## Once it's answered, it works in the background

Most people only meet this box when a job starts or ends, and once it's answered the threshold works quietly for the rest of the year. If a refund or a bill does arrive, it's the year's tax catching up with your pays. The [first tax return guide](/blog/first-tax-return) shows what to expect when it all comes together.

## A note from us

Tax is withheld pay by pay, but the threshold works across a whole year, which is why one box on a form can feel so confusing. We are building Clova so the pay that actually lands gets a plan, whichever job it comes from.

## Common questions

### Should I claim the tax-free threshold?

Yes, if you're an Australian resident for tax purposes and this is your only job or the one that pays you most. Answer no at every other job, unless your total income for the year from every payer will be $18,200 or less.

### What does no tax-free threshold mean?

It means that employer withholds tax from the first dollar it pays you, without allowing for the $18,200. It doesn't change the tax you owe for the year. Anything withheld beyond that comes back as a refund after you lodge your tax return.

### How do I change my tax-free threshold from no to yes?

Give that employer a withholding declaration. You can complete it through myGov, then print the summary for your employer, or use the paper form. If another job is already using the threshold, give that employer a withholding declaration switching it to no at the same time.

### How much can you earn before you pay tax?

A full-year Australian resident pays no income tax on the first $18,200. In 2026–27 the low income tax offset also brings income tax to nil on taxable income up to $22,866. The Medicare levy is worked out separately and is reduced or nil on low incomes.

### Can I claim the tax-free threshold on a working holiday?

Working holiday makers normally answer no on this declaration. Foreign residents for the full year can't claim the threshold. Becoming a resident for tax purposes partway through the year gives you a smaller threshold.

## Sources

1. [How to claim the tax-free threshold](https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/tax-free-threshold/how-to-claim-the-tax-free-threshold) · Australian Taxation Office
2. [Multiple jobs or change of job](https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/tax-free-threshold/multiple-jobs-or-change-of-job) · Australian Taxation Office
3. [Tax file number declaration, question 9](https://www.ato.gov.au/forms-and-instructions/tfn-declaration/paper-tfn-declaration-form-for-payees) · Australian Taxation Office
4. [Withholding declaration](https://www.ato.gov.au/forms-and-instructions/withholding-declaration) · Australian Taxation Office
5. [Access and complete employment forms in ATO online](https://www.ato.gov.au/online-services/online-services-for-individuals-and-sole-traders/ato-online-services-and-mygov/using-ato-online-services/access-and-complete-employment-forms-in-ato-online) · Australian Taxation Office
6. [PAYG withholding variation application](https://www.ato.gov.au/forms-and-instructions/payg-withholding-variation-application) · Australian Taxation Office
7. [Tax rates for Australian residents, 2026–27](https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents) · Australian Taxation Office
8. [Low income tax offset](https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/tax-offsets/low-income-tax-offset) · Australian Taxation Office
9. [Medicare levy reduction for low-income earners](https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy/medicare-levy-reduction/medicare-levy-reduction-for-low-income-earners) · Australian Taxation Office
10. [Withholding Schedules Instrument 2026, Schedule 1](https://www.legislation.gov.au/F2026L00716/asmade/2026-06-12/text/original/epub/OEBPS/document_1/document_1.html) · Federal Register of Legislation

## Related reading

- [Take-Home Pay: What Lands in Your Account and Why](https://getclova.com/blog/take-home-pay)
- [Starting Your First Job: Tax File Number, TFN Declaration, Super and Bank Details](https://getclova.com/blog/starting-first-job)
- [Your First Tax Return in Australia: What to Gather and How to Lodge](https://getclova.com/blog/first-tax-return)

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