From a combination of insecure work, variable working hours, and low rates of pay, more and more Australians are turning to “side-hustles” to make the ends meet. A second income can be a great way to make extra money, but it can also have a big impact on your tax bill.
What tax should I pay?
Depending on how much your employer pays you, you pay tax based on the income tax bracket you fall into. That is unless you earn below the tax-free threshold of $18 200. Beyond that, you’ll be taxed according to the tax brackets:
In the case of having only one employer, your employer deducts the tax amount payable to ATO based on the income they pay you. However, if you have two or more jobs, it can become difficult for employers to know where you sit on the income scale (because they may not know about your other jobs), making it more likely they will either deduct too little tax or too much tax.
One way to fix this is when you complete your tax returns at the end of the tax year where you’ll include the details of income from your all jobs. Your tax is then worked out based on your total income. Because of the additional income, you may find that you have to pay additional tax, even when your other employer may have paid tax on the other income as well. This is because you be falling under a different tax bracket when the income from the two jobs is combined.
Can I claim any deductions?
You may be able to claim expenses that you incur for each of your jobs, provided the expenses were directly related to your job, that you weren’t reimbursed by your employer and that you can prove that you spent the money (for instance, you have a receipt or an invoice).
Tax on the “gig economy” income
If you’re earning income from your online business, freelance work, uber, or any other “non-typical” job, it’s important to understand that you’ll be responsible for paying your own income tax.
So, being self-employed generally comes with extra tax obligations. You’ll need to look after your own taxes (and also potentially your own superannuation). It’s a good idea to open a bank account specifically to cover future tax payments, pay an amount into it each month that will be sufficient to cover your potential tax liability based on your average monthly turnover and – crucially – avoid touching that money until the time comes to pay the ATO.
Contact Your Local Tax Accountant For Help
When it comes to tax, a second income can be a blessing or a curse. It’s important to understand how your extra income will be taxed, as well as what deductions may be available to you.
Tax time can be even more complex if it includes multiple sources of income or deductions. If you have any questions or are unsure about what deductions are possible for your side job, contact a tax accountant today to get the help you need to stay on the right side of ATO.
