Tax Guide for a Second Job in Australia: What You Need to Know
Taking on a second job is a great way to boost your income, but it can make your tax situation a little more complex. This guide explains how having two jobs affects your tax, the common pitfall of double-dipping the tax-free threshold, and how to avoid a surprise tax bill at the end of the year.
How Your Second Job Affects Your Tax
The Australian tax system is progressive, meaning the more you earn, the higher the rate of tax you pay on each additional dollar. Your income from all jobs is combined when the ATO calculates your total tax liability for the year.
When you start a new job, you fill out a Tax File Number Declaration (TFN Declaration) form. The critical question on this form is: "Do you want to claim the tax-free threshold from this payer?"
- The Tax-Free Threshold: This is the amount you can earn each financial year without paying income tax. For the 2024-25 financial year, this is $18,200.
The Golden Rule: Only Claim the Threshold Once
This is the most important part of managing two jobs:
You can only claim the tax-free threshold from one payer.
- Your Main Job: You should claim the tax-free threshold from your primary employer (the job where you expect to earn the most). This means they will withhold tax from your pay based on you earning $18,200 tax-free.
- Your Second Job: You must answer "No" to claiming the tax-free threshold on the TFN declaration form for your second job. This instructs your second employer to withhold tax from the very first dollar you earn, at a higher rate.
Why is this necessary?
If you claim the threshold from both employers, both will apply the tax-free amount to your income. This means not enough tax will be withheld from your combined income across both jobs. While your take-home pay will look higher each week, you will end up with a significant tax debt when you lodge your return, as the total tax withheld won't cover your total liability.
Understanding the Higher Withholding Rate on Your Second Job
Because you don't claim the tax-free threshold from your second employer, they are required to use the higher "no tax-free threshold" tax rates. This ensures more tax is withheld from this income, helping to cover the higher marginal tax rate you'll likely pay on your combined earnings.
While the exact withholding amount varies, you can expect a higher portion of your second paycheck to go toward tax. This is a good thing—it prevents a nasty surprise later.
Will I Pay More Tax Overall?
No. You do not pay more tax simply because you have two jobs. Your total tax payable is calculated on your combined taxable income from all sources for the year.
The difference is all about when you pay the tax:
- Claiming correctly: More tax is withheld from your second job's pay during the year.
- Claiming incorrectly (from both): Less tax is withheld during the year, but you have to pay a large lump sum after you lodge your tax return.
The final amount of tax you owe the government is the same; the timing of the payments is what changes.
What to Do at Tax Time
Lodging your tax return is straightforward when you have two jobs. The ATO will receive all your income data from both employers via Single Touch Payroll (STP).
- Combine All Income: You must declare the income from both jobs on your single tax return. Your myGov account will typically pre-fill this data for you by mid-July.
- Claim Deductions: You can claim work-related expenses for each job, provided you have the receipts. Keep your deductions separate for each job in your records.
- The Outcome: The ATO will calculate your total tax liability based on your combined income. They will then add up all the tax already withheld by both employers.
- If too much tax was withheld, you will receive a refund.
- If too little was withheld (because you claimed the threshold from both jobs), you will have a tax bill.
Key Steps to Manage Your Two Jobs Correctly
1. Complete Your TFN Declarations Correctly
Claim the threshold from your primary job only. Answer "No" to the threshold question for any additional jobs.
2. Keep Meticulous Records
Keep all your payslips, payment summaries (or check your Income Statements in myGov), and receipts for expenses related to each job.
3. Use the ATO's Tax Withholding Calculator
If you're unsure if enough tax is being withheld, use the calculator on the ATO website. You can then request a variation with your employer if needed.
4. Plan for a Potential Bill
If you think you may have underpaid tax during the year, start setting aside money to cover a potential tax bill.
FAQs About Having a Second Job
Q: What if I already claimed the tax-free threshold from both jobs by mistake?
A: Don't panic. You can fix it. Complete a Withholding Declaration form for your second job and provide it to your employer, stating you no longer wish to claim the tax-free threshold. This will increase the tax withheld from your future payslips, reducing the size of a potential tax bill.
Q: Can I split the tax-free threshold between two jobs?
A: No. The ATO does not allow you to split the $18,200 threshold between multiple employers. You must only claim it from one.
Q: My second job is cash-in-hand. Do I still need to declare it?
A: Yes. All income earned, regardless of how it is paid, must be declared in your tax return. The ATO has sophisticated data-matching systems, and failing to declare cash income can lead to penalties and interest.
Q: What if I have more than two jobs?
A: The same rule applies. Only claim the tax-free threshold from one employer (your main job). Do not claim it from any of the others.
Q: Does my second job push me into a higher tax bracket?
A: It's your combined income that determines your tax bracket, not the individual job. Earning $50,000 from one job results in the same tax liability as earning $30,000 from one job and $20,000 from another.