How to Understand the Tax-Free Threshold as a Student in Australia

The tax-free threshold is the amount of income you can earn in a financial year without paying income tax. For most residents in Australia, that's AUD $18,200. This is general information only, not financial or tax advice; the Afrovo team is not a licensed financial adviser. For your specific situation, check the ATO website or speak to a registered tax agent.

If you're working part-time or full-time while studying, understanding the tax-free threshold can help you figure out whether you'll owe tax and how much of your pay is really yours to keep.

What Is the Tax-Free Threshold?

The tax-free threshold is a cut-off set by the Australian Taxation Office (ATO). If your total income for the financial year (1 July to 30 June) is at or below $18,200, you don't have to pay income tax.

Think of it this way: the first $18,200 you earn is tax-free. Anything above that gets taxed at your marginal rate.

For example, if you earn $20,000 in a financial year, you only pay tax on the $1,800 above the threshold, not on the whole amount.

Who Gets the Tax-Free Threshold?

Not everyone in Australia gets the tax-free threshold. Whether you qualify depends on your visa status and residency for tax purposes.

Students on a Student Visa

If you're on a subclass 500 (student visa), you are generally classified as a foreign resident for tax purposes. This means you do not get the $18,200 tax-free threshold. Instead, you're taxed on your total income from Australian sources at the non-resident tax rate, which is higher.

The non-resident tax rate starts from the first dollar you earn and is typically 32.5% plus the Medicare levy (2%).

Students Who Have Become Australian Residents

If you've been in Australia for long enough and meet the residency test (generally living in Australia for more than half the income year, or intending to stay indefinitely), you may be classified as a resident for tax purposes. In that case, you do get the $18,200 tax-free threshold.

To find out whether you're a tax resident, check the ATO's residency tests.

How Your Employer Should Handle the Tax-Free Threshold

When you start a job in Australia, your employer asks you to complete a Tax File Number (TFN) declaration. This form tells them your visa status and tax residency.

If you're a non-resident student visa holder, your employer should be withholding tax from every paycheque based on the non-resident rate. If you're a resident, they should only withhold tax on income above $18,200.

Always give your employer your TFN within your first 28 days of work. If you don't, they must withhold tax at the highest rate.

How the Tax-Free Threshold Affects Your Weekly Pay

Let's look at a real example. Imagine you work part-time on a student visa at the national minimum wage of $24.95 per hour, working 15 hours per week.

Your weekly gross pay: 15 hours × $24.95 = $374.25

As a non-resident (student visa holder): Your employer withholds tax at roughly 32.5% + 2% Medicare levy = 34.5% (or a flat withholding rate set by the ATO, which is currently higher). You'd receive roughly $245 per week after tax.

As an Australian tax resident (if you qualify): Since your pay is still below $18,200 per year (15 hours/week × 52 weeks ≈ $19,474, and after non-concessional deductions you'd fall within or near the threshold), your employer would only withhold tax on amounts above the threshold, meaning you'd keep significantly more.

To see your exact pay and tax, check your payslip. Learn how to read your Australian payslip line by line to understand what's being withheld.

What Happens at Tax Time

When the financial year ends (30 June), you lodge a tax return to reconcile what your employer withheld against what you actually owe.

If you're a non-resident student visa holder: You'll lodge a return showing all your Australian income. If too much tax was withheld, the ATO will refund you. If too little was withheld, you'll owe more.

If you're an Australian tax resident: You'll lodge a return showing your total income. Because of the tax-free threshold, you may get a larger refund if your income stayed below $18,200.

You can lodge online through myGov for free. The self-lodgement deadline is 31 October, though the ATO often extends this deadline.

Need help? Read how to set up myGov and link the ATO for your tax return.

When You Might Not Use the Full Threshold

Even if you're a tax resident, there are situations where the threshold doesn't apply fully:

• •Working as a contractor or sole trader: You need to report your income and expenses, and the tax-free threshold applies to your net profit, not gross revenue.
• •Receiving student support payments: Some government payments (like Youth Allowance or Austudy) may count toward your assessable income, affecting how much of the threshold you can use.
• •Multiple income sources: If you have investment income, rental income, or work in multiple jobs, the threshold applies to your total assessable income.

If any of these situations apply to you, speak to a registered tax agent or check the ATO website.

Superannuation and the Tax-Free Threshold

Your employer must pay superannuation (a retirement savings contribution) into your super account. From 1 July 2025, this is 12% of your ordinary time earnings.

Superannuation contributions are not counted as part of your assessable income for the tax-free threshold calculation. That means they don't affect whether you stay below $18,200.

However, once money is in your super account, it's subject to super tax (15% on earnings), which is separate from income tax.

Learn more: how superannuation works for international students in Australia.

Scam Alert: Tax File Number Scams

Scammers sometimes pose as the ATO or your employer asking for your TFN via email, text, or phone. The real ATO never asks for sensitive details this way.

Always:

• •Go directly to the ATO website or call 1800 008 540 if you're unsure.
• •Never reply to unsolicited emails or click links in text messages claiming to be from the ATO.
• •Report suspicious messages to Scamwatch.

Frequently Asked Questions

Q: I'm on a student visa and earned $22,000. Will I pay tax on all of it?

A: As a non-resident (student visa holder), you don't get the $18,200 tax-free threshold. You'll pay tax on the full $22,000 at the non-resident rate (around 34.5% including Medicare levy). Your employer should have withheld this already, and your tax return will calculate the exact amount owed.

Q: Can I switch from non-resident to resident tax status partway through the year?

A: Possibly, depending on when you meet the residency test. The ATO decides your tax residency status for the whole financial year based on when and how you become a resident. If you become a resident mid-year, your tax residency usually applies from that date. Speak to the ATO or a tax agent for your specific dates.

Q: If I earn exactly $18,200, do I have to lodge a tax return?

A: If you're a resident and earn exactly $18,200 or less, you generally don't need to lodge a return unless you had tax withheld (in which case you should, to claim a refund). If you're a non-resident, you must lodge a return on all Australian income. Check your specific situation on the ATO website.

Q: My employer didn't withhold any tax. What do I do?

A: Tell your employer immediately. They should be withholding tax based on your TFN declaration. If they don't correct it, you may owe tax when you lodge your return. Lodge your return on time and work with the ATO to sort it out. For pay rights issues, also contact Fair Work.

Q: Do I pay tax on money I transfer home to my family?

A: No. Tax is on your income earned in Australia, not on how you spend or send it. Once you've paid tax on your income, it's yours to send home, invest, or save as you wish.

Summary

The tax-free threshold is $18,200 for Australian tax residents, but most student visa holders are non-residents and don't get this threshold. Instead, they pay tax from the first dollar earned at a higher non-resident rate.

Understanding whether you're a resident or non-resident is the first step to knowing how much tax you'll pay. Check your TFN declaration, review your payslip, and lodge your tax return by 31 October to get any refund owed.

For more on managing your money as a student, visit the Afrovo student finance hub or check the ATO website for the most current thresholds and rates.