In a world where taxes are often seen as unavoidable, it can be difficult to find tax breaks that are beneficial. But by understanding the basics of the Australian Taxation Office’s (ATO) tax-free thresholds, you may be able to avoid paying income tax on some of your income. So what is a tax-free threshold, and how do you claim it?
In this article we will discuss the basics of the tax-free thresholds and how you can benefit from them.
What is a Tax-Free Threshold?
The tax-free threshold https://perthmobiletax.com.au/what-is-a-tax-free-threshold-and-how-can-i-claim-it/ is the amount of income you are allowed to earn before you have to pay any income tax. The amount of the threshold varies based on where you live and your age, and in 2020 it is set at $18,200 for individuals who are 18 or older and $9,000 for those under 18. If you are an Australian resident, the amount of the tax-free threshold is $18,200 regardless of age. This means that if you meet the criteria, you can earn up to $18,200 without paying any income tax.
Who is eligible for the Tax-Free Threshold?
Anyone who meets the criteria set forth by the ATO is eligible to claim the tax-free threshold. The criteria includes being an Australian resident for taxation purposes, being 18 or over and earning less than the set amount of $18,200 per year.
How to Claim the Tax-Free Threshold?
To claim the tax-free threshold, you must fill out a tax return with the ATO. When filling out the form, make sure to indicate that you wish to claim the tax-free threshold. You can also use the free online services offered by the ATO, such as their tax agent or MyTax. Once your tax return has been completed and submitted, you can expect to receive a notice from the ATO informing you if your claim has been approved.
Benefits of the Tax-Free Threshold
There are several benefits associated with claiming the tax-free threshold. Here are just a few of them:
1. You pay less tax – This is obviously the main benefit of claiming the tax-free threshold. By not having to pay tax on income up to the threshold amount, you can save hundreds of dollars each year.
2. Your take-home pay increases – Because you are not paying taxes on that income, your take-home pay increases as well. This can help you put more money into savings or towards other financial goals.
3. It is easier to manage your finances – Knowing how much money is coming in and exactly how much you need to pay in taxes can make budgeting much easier. This makes it easier to track your spending and plan for the future.
4. You may be eligible for other tax offsets – Depending upon your circumstances, you may be eligible for other tax offsets or rebates that can help reduce your overall tax bill. These offset amounts can vary, so it’s always best to check with the ATO to find out what you’re eligible for.
Conclusion
By understanding the basics of the tax-free thresholds, you can avoid paying income tax on some of your income. Claiming the tax-free threshold can provide you with a variety of benefits including more take-home pay and better management of your finances.
The tax-free threshold is an important concept to understand and can help you greatly in reducing the amount of income tax you have to pay. Use the information in this article to help you take advantage of this wonderful opportunity and make the most of your tax return.
