If you’re juggling multiple jobs in Australia, grasping the second job tax rate is key. As someone earning from various sources and looking to lodge your tax return online, it’s crucial to get a handle on this, especially with side hustles and gig economy roles on the rise. Knowing how your second job affects your taxes will help you manage your finances better and avoid surprises come tax time.
What counts as your second job?
Under Australian tax law, your second job is any additional work you take on alongside your main employment. This includes part-time positions, freelance projects, or any other income-earning activities outside of your primary job. Recognising what qualifies as a second job is important because it affects the tax rates you’ll be subject to.
What is a second job tax rate?
When you’re working a second job in Australia, your tax rate for that additional income is determined by your total earnings from all sources. It’s important to remember that while you can claim the tax-free threshold from your primary job—currently $18,200 for the 2022-2023 financial year—you can’t apply this threshold to your second job.
So, what does this mean for you? Once your combined income from both jobs crosses the tax-free threshold, the income from your second job will be taxed starting at a rate of 19%, and this rate will increase progressively with your total income. Keep in mind, tax rates can shift annually, so it’s crucial for you to stay informed about the current tax brackets. This knowledge will help you plan your finances and ensure you’re not left with tax surprises at the end of the financial year.
Let’s take a look at an example of how the second job tax rate works:
Let’s say you have a primary job where you earn $50,000 per year, and you’ve claimed the tax-free threshold with this employer. Now, you’ve taken on a second job to boost your income, where you expect to earn an additional $10,000 per year.
For your primary job, the first $18,200 of your income is tax-free because you’ve claimed the tax-free threshold. You’ll pay tax on the remaining $31,800 according to the progressive tax rates.
For your second job, since you can’t claim the tax-free threshold twice, every dollar you earn from that $10,000 will be taxed. The tax rate starts at 19% for income over the threshold and up to $45,000. Therefore, you’ll pay 19% on the entire $10,000 from your second job, which amounts to $1,900 in tax for the year from this job alone.
Keep in mind, this is a simplified example and doesn’t take into account other factors like tax offsets, deductions, or Medicare levy which might apply to your situation..
The tax-free threshold and multiple jobs
As mentioned above, the tax-free threshold in Australia is currently $18,200 (as of the 2022-2023 financial year), which means you can earn up to this amount before you have to pay income tax.
If your first job’s income for the year is below this threshold and you have no other income, then you haven’t used up your entire tax-free threshold. However, the tax-free threshold can only be claimed from one employer, typically your main job. This is to prevent being under-taxed throughout the financial year.
Here’s what happens with your second job:
Withholding tax: When you start a second job, you should not claim the tax-free threshold with this employer. The employer will withhold tax from your earnings at a second job tax rate, assuming that you have already claimed the tax-free threshold with your first job.
Combined income: If the income from your second job takes your total earnings over the $18,200 threshold, then you will need to pay tax on the excess. However, if your combined income from both jobs still does not exceed the tax-free threshold, then you will not owe tax, and any tax withheld by your second job would be refunded to you when you lodge your tax return.
Tax return: When you lodge your tax return, the Australian Taxation Office (ATO) will calculate your total income from all sources and apply the tax-free threshold across your total income. If the total income is less than $18,200, and tax has been withheld from your second job, you would typically receive a refund for the tax withheld.
It’s important to provide accurate information to both employers regarding your intention to claim the tax-free threshold to ensure the correct amount of tax is withheld from your wages.
How to lodge your tax returns with a second job
Lodging your tax returns with multiple jobs may sound like an admin nightmare, but it doesn’t have to be.
- Gather your income information – Collect all your income details from your primary and second jobs.
- Utilise tax return software – Use reliable tax return software, which can help you manage your income from multiple sources and ensure accurate calculations.
- Claim deductions and tax offsets: Be sure to claim any deductions or tax offsets that apply to your second job.
- Stay informed: Tax laws can change, so it’s essential to stay informed about any updates that may affect your tax obligations.
Tips for managing taxes on multiple jobs
Managing your second job tax rate on multiple jobs can be challenging, but with the right strategies, you can optimise your financial situation. Here are some expert tips:
- Maintain accurate records – Maintain detailed records of your income, expenses, and deductions related to each job.
- Seek professional advice – Consider consulting with a tax professional, like the team at Personal Tax Specialists who can provide tailored guidance based on your unique circumstances.
- Utilise online resources – Take advantage of resources and online tools, like our Australian tax calculator that can help you calculate your tax obligations more accurately.
- Stay organised – Ensure that you meet all deadlines for lodgment and payment to avoid penalties.
Final thoughts
Managing your second job tax rate in Australia requires a good understanding of tax rates, diligent record-keeping, and careful planning. By following the guidelines and seeking professional advice when needed, you can work through how to have multiple income sources whilst ensuring compliance with Australian tax laws.
If you need help, then check out our online tax agent services.
FAQs
What is the tax on a second job in Australia?
The second job tax rate in Australia is determined by your total annual income from all sources. It follows a progressive tax system, with higher incomes incurring higher tax rates.
Is the tax on a second job in Australia higher than my primary job?
The tax on your second job may be higher than your primary job if you don’t claim the tax-free threshold on the second job.
How much do you get taxed for a second job?
The amount of tax you pay on your second job depends on your total income. It can vary based on your earnings and other factors.
What should I know about tax on a second job in Australia for accurate tax return filing?
To ensure accurate tax return filing for your second job in Australia, it’s essential to understand the tax rates, claim the tax-free threshold only on your primary job, and keep thorough records of your income and expenses.
