Many Australians take on a second job to boost their income, cover extra expenses, or save for a goal. A common question is whether you get taxed more when you have two jobs. The short answer is no, you don’t pay a higher tax rate just because it’s a second job, but your overall income can push you into a higher tax bracket.
How Income Tax Works in Australia
The Australian Tax Office (ATO) uses a progressive tax system. This means:
- The first portion of your income is taxed at the lowest rate.
- As your income increases, the extra income you earn can be taxed at higher rates.
- Your income from all jobs is added together to work out your total tax for the year.
Why a Second Job Can Affect How Much Tax You Pay?
When you start a new job, you fill out a Tax file number (TFN) declaration form. This tells your employer whether you’re claiming the tax-free threshold (the first $18,200 of your income that’s tax-free). You can only claim this threshold from one employer at a time.
If you claim it from both jobs, you might not have enough tax withheld during the year, leading to a bill at tax time.
If you don’t claim the tax-free threshold from your second job, your employer will withhold tax at a higher rate from every dollar you earn there. This isn’t a penalty, it’s to make sure enough tax is collected to cover the tax on your total income.
Example
- Job 1 income: $50,000
- Job 2 income: $20,000
- Total income for the year: $70,000
The ATO calculates tax on the $70,000 total, not each job separately. Your employers withhold tax based on your TFN declaration settings, which affects whether you get a refund or a bill at the end of the year.
Other Things to Keep in Mind
- Medicare Levy: This is generally 2% of your taxable income and applies to your combined earnings.
- HECS-HELP or other study debts: Each employer will only withhold repayments based on the income they pay you. However, when your total income from all jobs is combined, you may be required to pay a higher percentage of your HECS/HELP debt that what has been withheld.
- Extra withholdings: If you want to avoid a tax bill, you can ask your second employer to withhold additional tax.
Final Words
Working a second job doesn’t mean you’re taxed at a special higher rate. It simply increases your total taxable income, which may put part of your earnings into a higher tax bracket.
This information is general and based on current ATO rules. It doesn’t take into account your personal circumstances, so it’s best to speak with a registered tax agent about your specific situation.