Second Job Tax Confusion: What Employees Need to Know in Australia

Navigating taxes on a second job doesn’t have to be a maze. Here’s your simple guide to understanding how it works.

Do You Really Get Taxed More on a Second Job?

First things first. You might think that having a second job means the taxman’s gonna take a bigger cut from your hard-earned cash. But that’s not really how it works. In Australia, you’re taxed on your total income, not on each individual job.

Our tax system works using income brackets.

You pay a set % tax for each dollar you earn within a bracket, each dollar that goes into the next bracket will be taxed at a higher % rate.

So if job one pays you $50k and job two brings in another $20k, it’s not like the whole $70k gets taxed at some crazy-high rate. The entire $70k will be broken down into brackets and a tax % will apply to each bracket.

The 2023/2024 Australian resident individual tax brackets are as follows:

Let’s apply this to our example of someone earning $70,000:

So, if you make $70,000 in total from your jobs, you’d pay:

  1. $0 on the first $18,200
  2. $5,092 on the next $26,800
  3. $8,125 on the remaining $25,000

Total tax: $13,217 for the year. This doesn’t consider extras like the Medicare levy, tax offsets, or other deductions. It’s just the basic tax.

Understanding Tax Choices for Your Second Job: To Claim or Not to Claim the Tax-Free Threshold ?

When you start a second job, you’ll have an option on your tax form. Do you want to claim the tax-free threshold? Here’s what it means either way:

Claim the Tax-Free Threshold:
If you tick this box, you’ll have less tax withheld from each paycheck. Meaning you have more cash to take home. However, when tax time rolls around, you might find that you owe the ATO money because not enough tax has been withheld from your paycheck.

Don’t Claim the Tax-Free Threshold:
In this case, more tax will be taken from each paycheck. It might feel like a bummer at the moment, but come tax time, you end up with less of a nasty surprise or in some situations end up with a refund.

So, What Should You Do?

Well, that’s up to you and your specific financial situation. Here are some things to consider:

  • Do you like the idea of less nasty surprises or a potential tax refund? Then maybe don’t claim the tax-free threshold.
  • Are you confident in setting aside a bit of money to cover a possible tax bill? Then claiming the tax-free threshold could be a good idea.

Either way, the most important thing is to be aware of the choices you have and how they can impact you at tax time.

The takeaway here is, it all comes out the same by the time you lodge your tax return.

So, there you have it! Whether you’re holding down one job or juggling a couple, understanding your tax options can save you headaches and surprises later on. And hey, if all this tax talk is confusing, chat with an expert to get tailored advice that fits your life.

We hope you’re enjoying our blog, just a note though. The information provided here is intended for general informational and educational purposes only. While we aim for accuracy, we can’t guarantee that this content will apply to your specific situation—every business owner’s circumstances are unique.

This blog is not a substitute for personalized advice from a qualified accountant, tax advisor, or any other professional. If you have questions specific to your individual circumstances, we strongly recommend consulting a professional for tailored advice.

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