It’s a common misconception in Australia that getting a second job will somehow double and increase your tax payable. But is it true?
Where there’s smoke, there’s often fire isn’t there?
The fact of the matter is the more you earn, the more tax you pay, however, your second job won’t increase your tax payable, but it may reduce the amount of tax you pay from your first job. How does this happen and what are the details? In this article, we will walk through everything you need to know about your second job and tax rates on second job.
Tax brackets in Australia
Before you start calculating or worrying about anything to do with tax on a second job in Australia, let’s get an understanding of what income tax rates/individual tax rates are. Also known as tax brackets, these rates determine how much tax you pay and how tax offsets are calculated, regardless of Australia’s second job tax. There are no specific tax rates on second job, just one set of tax rates in Australia and how much tax you pay on your second job, depends how much you earn from your combined jobs.
The rate in Australia is:
- Bracket 1: $0-$18,200 you pay no tax
- Bracket 2: $18,201-$45,000 you pay 19 cents for every $1 you earn over $18,200
- Bracket 3: $45,001-$120,000 you pay $5,092 + 32.5 cents for every $1 you earn over $45,000
- Bracket 4: $120,001-$180,000 you pay $29,467 + 37 cents for every $1 you earn over $120,000
- Bracket 5: $180,001 and above you pay $51,667 + 45 cents for every $1 you earn over $180,000
The above rates do not include the Medicare levy of 2%.
For help trying to work out how much tax you should be paying, hop onto One Click Life or use our tax calculator for your second job. When you enter your details into the second job tax calculator enter in your highest paying job first, then add on your second job. The difference in tax will be your second job tax.
Why do people think getting a second job will increase their tax?
The main reason people probably think that getting a second job will increase their tax payable is because they are earning more money, and of course if you’re earning more money you’ll also be paying more tax.
Let’s have a look at scenario in a table:
|First job + second job||$30,000||$2,242|
As you can see in this scenario, you’re paying $1,900 second job tax on the extra $10,000 income from your second job.
No doubt you will be earning more money by working a second job than if you were just working your first, and we can see why people think they get taxed more by working two. As you can see from the table, the amount of tax you will pay has increased a lot more than your income. The tax rates on second job are based on how much you earn in your first job. As you can see in the above example the tax rates for second job are applied as a result of the $20,000 first job earnings ensured the earnings from the $10,000 from the second job were in Tax Bracket 2.
But if your income from your first job was $30,000, you’d still be paying the same amount of tax if you generated the $30,000 from two jobs.
At the end of the day all that matters is how much income you received, not which job or how many jobs you got it from.
You are earning more money, which means you are getting taxed more.
This tax estimate is without considering any tax deductions, which will reduce your tax payable and maximise your money. The best way to do this is with One Click Life’s easy-to-use taxation platform. Not only can you finish your tax return in minutes, but it will also all be reviewed by a tax professional so you can be sure you aren’t getting in hot water with the ATO.
What is the tax free threshold?
The tax free threshold is a way for you to reduce the amount of tax withheld from your pay throughout the year.
It works like this:
- If you have earned less than $18,200 for the year, your employer will not take tax out of your pay.
- When you earn more than $18,200 for the year, your employer will start taxing you accordingly.
To be able to claim the tax free threshold, you must:
- Be an Australian resident for tax purposes
- Only claim it on one of your jobs (usually the one that pays more)
- Check that you want to claim the tax free threshold when you submit your TFN declaration to your employer
If both your jobs combined means you earn under the tax free threshold, this means the tax rate on second job Australia is 0% as your earnings are under the threshold.
Can you claim tax free threshold on 2 jobs?
If you’re wondering can you claim tax free threshold on jobs we’ll take a look at a few options of how it works:
- If you’re certain you will earn less than $18,200 for the year, read the next section, you can claim the tax free threshold on 2 jobs.
- If you think you’ll earn over the tax free threshold, you shouldn’t claim tax free threshold on 2 jobs. You are better off only claiming the tax free threshold on one job so you don’t have a problem at tax time.
If you have claimed tax free threshold on 2 jobs and you’re earning over the tax free threshold, you may have a tax bill when you file your tax return. Best to speak to a tax agent when its time to file your tax return.
What if your income for the year is less than $18,200?
If you’re certain of your total income for the entire financial year (1st of July to 30th of June), then you can claim the tax free threshold on both of your jobs. This means that the tax rate on second job will be 0% and no tax will be withheld from you during the year.
If your income increases and you’re going to earn more than $18,200 for the financial year you’ll have to provide one of your employers with a new withholding declaration. This essentially means you’re bowing out of claiming the tax free threshold on one of your jobs. This means you will have a tax rate for second job based on the tax brackets above.
Is working 2 jobs worth it?
At the end of the day the main thing that counts is your work-life balance and if you enjoy yourself or not. If you need some extra money, you should take up a second job, but if you don’t, then don’t worry about it.
If you’re wondering what income is tax free and are concerned about getting taxed from your second job, don’t be. Whether you have two jobs or one, it won’t matter. All that matters is the amount of income you earn, regardless of the number of jobs you have.
If you want to minimise your tax the best way to do that is by claiming tax deductions – which One Click Life can help you with. Reduce your tax and maximise your money in no time with our easy-to-use platform.
Who can help you claim a bigger tax refund when working two jobs?
The more you deduct, the less tax you pay and the more money you can spend on yourself. The sure-fire way to do that is with a tax agent or accountant. You can also claim your tax agent/tax return fee back on tax, so why wouldn’t you use one to minimise your tax and maximise your money?
One Click Life offers online tax returns at your fingertips in an easy-to-use platform run by industry professionals.
Taxes, mortgages, health insurance, and wills can be time-consuming and tedious. Our app allows you to be able to do this fuss-free, giving you a simple way to organise, track and manage all of your life admin in one place.
Let One Click Life take care of your tax return and life’s essential tasks, so you can spend more time doing the things you love.