What happens if i don’t claim the tax free threshold?

As a result you will end up paying more taxes if you don’t claim tax free threshold. All your income will be taxed from the first dollar you earn, leading to higher tax deductions and potentially paying more tax than required. It’s important for individuals to consider their tax situation carefully and claim the tax-free threshold if they’re eligible to maximize their take-home pay and minimize their tax liability.

How to claim tax free threshold

Claiming the tax-free threshold is a simple process. When you begin a new job, your employer will provide you with a tax file number declaration form to complete. To claim the tax-free threshold, all you need to do is answer ‘yes’ to question 9 – ‘Do you want to claim the tax-free threshold from this payer?’ The same procedure applies if you’re receiving Centrelink payments.

By opting to claim the tax-free threshold, your take-home pay will be higher compared to selecting ‘no’, as your employer will withhold less tax from each paycheck.

Typically, employees choose to claim the tax-free threshold, unless they’re taking on a second job (more on this later)

Pros and cons of tax free threshold

ProsCons
More money in your pocketSmaller refund or larger bill
No tax if you earn under the thresholdEligible for only one job
advantages and disadvantages of tax free threshold

Make sure to checkout complete guide to tax free threshold

See also  Fortnightly Tax Table 2024
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