How Much Tax Do You Pay on a Second Job?

So, you’ve picked up a second job – maybe to save for a holiday, pay down debt, or just get ahead financially. Good on you! But now you’re wondering: how much tax will I pay on this second gig? And what’s the deal with the tax-free threshold? Let’s break it down in plain English.

First, What Is the Tax-Free Threshold?

If you’re an Australian resident for tax purposes, you can earn up to $18,200 per year tax-free. That’s your tax-free threshold. It’s kind of like a buffer – you don’t get taxed on income up to that amount.

Here’s what that looks like over time:

• $350 a week tax free
• $700 a fortnight tax free
• $1,517 a month tax free

If you’re working one job, you can claim this tax-free threshold with your employer, and less tax gets taken out of your pay each time.

What Happens When You Get a Second Job?

Here’s where people often get caught out: you can only claim the tax-free threshold from one employer at a time.

So if your first job is your main source of income, claim the threshold there. Your second job? Don’t claim it. Why? Because the tax office (ATO) will assume you’ve already used up your tax-free threshold with your first job, and they’ll tax your second job at a higher rate to make sure you’re not underpaying tax overall.

It might seem a bit harsh when you see the bigger deduction in your second job’s payslip – but it saves you from getting hit with a surprise tax bill at the end of the financial year.

What If You Claim the Tax-Free Threshold Twice?

If you accidentally claim the tax-free threshold from both jobs, the ATO might not take out enough tax across the board. That means you could owe money come tax time. And trust us, plenty of Aussies have made this mistake.

In one case, a young worker ended up with a $7,000 tax bill just because they claimed the threshold with both employers. Not fun! News.com.au shared the full story here if you’re curious.

How Much Tax Will You Actually Pay on a Second Job?

If you don’t claim the tax-free threshold on your second job, the tax withheld will be based on the “no threshold” rate. For example, if you earn $12,000 from your second job during the year, the tax withheld might be around $4,140.

Yes, it’s more than you’d normally pay – but it’s a safety net. When you lodge your tax return, the ATO will balance it all out, and if you’ve paid too much, you’ll get a refund.

Made a Mistake? Here’s What to Do

Accidentally claimed the tax-free threshold with both employers? Don’t panic. You can fix it:

1. Fill out a new Tax File Number Declaration for the second job, ticking “No” to the tax-free threshold question.
2. Let your employer know straight away, so they can adjust your tax withholding.
3. If you’re unsure, speak with a tax agent or the ATO for help. It’s better to act quickly than be surprised later.

Final Thoughts

Working two jobs is a great way to boost your income, but don’t let tax mistakes trip you up. As long as you claim the tax-free threshold from only one employer, you’re on the right track.

When in doubt, the ATO’s official resources are super helpful, and chatting with a tax professional is always a smart move if you’re unsure.

Need some advice regarding side hustles and multiple jobs? Please don’t hesitate to get in touch. We’re here to help you stay tax smart!