Whether you’ve created your own side hustle or are working a part-time job on the weekends, it can be tempting to boost your take-home pay with a second source of income. While it can be a great way to give yourself a pay rise of sorts, it’s worth looking into the tax implications of a second job to ensure it’s worth your time. Let’s take a look at what a second job means in Australia.
Do I have to pay tax on my second job?
The short answer is yes. However, there are a number of factors to consider in order to determine how much tax you are obligated to pay.
If you’re an employee, your employer is required to withhold tax on your behalf. If you’re an Australian resident, the first $18,200 you earn is tax free, as part of the tax-free threshold. If you earn additional income, such as a second job, your new employer will be required to withhold tax at the higher rate, without the tax-free threshold.
On the other hand, if you’re an employee and chose to start your own business as a side hustle, you may be considered a sole trader. According to the Australian Taxation Office, the tax rates for sole traders are the same as individual taxpayers. This means the $18,200 tax-free threshold is available for both sole traders and individuals. However, as stated above, you cannot claim this threshold twice – only once.
How do I work out the tax for my second job?
The Australian Taxation Office will look at your total taxable income for the financial year, which means the income from both of your jobs will be added together. To avoid getting a rude shock come tax time, it’s definitely worth setting aside money regularly to cover your tax bill, if you decide to get a second job.
As discussed above, if you’re an employee for both jobs, this should be done automatically for you by your employer. Just remember to not tick the tax-free threshold on both jobs – only one.
On the other hand, if you’re doing a side gig as a freelancer or sole trader as your second job, you can use the tax brackets to determine how much money you should be setting aside each week or month. Just remember that your tax will be calculated from your total taxable income, including both jobs.
While you may be able to claim significant tax deductions as a sole trader, it’s best to not consider these when you’re setting aside your tax. That way, you might actually get a pleasant surprise come June 30 when your tax is calculated.
To ensure you’re paying the right tax, get an accountant onboard to help you through tax time.