When you take on a second job, your primary aim is likely to pay off debt or reach some other financial milestone. However, additional income from a second job or side gig can put you in a higher tax bracket, reduce your eligibility for tax credits, and may result in a large tax bill next tax season.
You may receive your income from 2 or more payers at the same time if you:
- have a second job or more than 2 jobs
- have a regular part time job and also receive a taxable pension or government allowance
- are working under an ABN as a contractor, sole trader or other business structure.
Here are some points as to how two jobs can affect your taxes:
- Adding a second income to your original income can sometimes push you up into a higher tax bracket, so you’ll be paying a greater percentage in taxes on the income from a second job.
- It’s key to get your withholding just right if you’re working for salary or wages so you’re not hit with a surprise tax bill at the time of taxes.
- Qualifying for some tax breaks depends on your adjusted gross income, so you could find that a second job makes you ineligible.
Where you have more than one payer, you should advise your other payers to withhold tax from your income at a higher rate. This is the ‘no tax-free threshold’ rate. Doing this reduces the chance of you having a tax debt at the end of the income year.
If your income is $18,200 or less
If you’re certain your total income for the income year from all your payers will be $18,200 or less, you can choose to claim the tax-free threshold from each payer. If you do this and your total income later increases to above $18,200, you’ll need to provide one of your employers with a withholding declaration. The withholding declaration will advise them you want to stop claiming the tax-free threshold from that payer.