Are you in the process of getting a second job to supplement your income? Or have you already received one, and are now simply confused about what you are being taxed on?
Gaining employment in a second position or job means that you may have a higher amount of tax withheld from your pay. Though this might sound daunting, it is simply because you are already claiming the tax-free threshold from another paying job.
The tax-free threshold in Australia is $18,200. If you are claiming your tax-free threshold, you are not paying tax on the first $18,200 earned in each income year. The tax-free threshold is equivalent to earning:
- $350 a week
- $700 a fortnight
- $1,517 a month
Withholding tax at a higher rate means that you are less likely to have a tax debt at the end of the income year
You may be receiving pay from two or more payers at the same time if you:
- have two or more jobs
- have a regular part-time job and receive a taxable pension or government allowance.
In these instances, your new employer will give you a Tax file number declaration to complete. Centrelink is also a payer who will give you this form if you apply for their payments.
When you fill in this form, you can choose whether to claim the tax-free threshold from your employer. However, if you are:
- Still earning income from your first employer, you should not claim the tax-free threshold for your second job
- No longer earning any income (including from paid leave), then you are entitled to claim the tax-free threshold from your second job and have a lower rate of tax withheld
- Starting to receive income from both employers, you can request that one employer withholds at a higher rate to avoid a tax debt at the end of the year.
If you are in the position of having two jobs, it is recommended to claim the tax-free threshold from the payer who usually pays the highest salary or wage. Your other payers then withhold tax from your income at a higher rate, which is known as the no tax-free threshold rate. This is likely to reduce incurring a tax debt at the end of the financial year.
Sometimes the total tax withheld from all sources may be more or less than the amount you need to meet your end of year tax liability. These tax withheld amounts are credited to you when you lodge your income tax return. If too much tax is withheld, it may result in a tax refund. However, if not enough tax was withheld, the difference may need to be paid to the Australian Taxation Office (ATO) so that you have paid enough tax for your income.
Confused, concerned or a little perplexed about what having a second job could mean for your tax obligations? Want to know more about what happens if the tax withheld isn’t enough? You can speak with a registered tax agent like us about your tax liability in the event of a second job.