Yahoo Finance ATO tax bill warning for nearly 1 million Aussies: 'Huge'
More Aussies are working multiple jobs as the cost of living pinches and this could have huge implications for their tax returns.
As the cost of living continues to squeeze household budgets, more and more people are working multiple jobs to make ends meet. But a tax expert is warning this could mean you’re stung with a bill this tax time.
The number of Aussies working multiple jobs rose to 974,000 in March, the latest Australian Bureau of Statistics data found. That’s roughly 7 per cent of the country’s employed people.
Tax Invest Accounting director and registered tax agent Belinda Raso told Yahoo Finance that second jobs were one of the main reasons people received a tax bill.
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“The biggest thing people need to know is if you had a tax debt last year, more than likely you're going to have one again this year,” Raso said.
“If you haven't worked out why you had that tax debt, it's just going to keep happening.”
How does having a second job impact tax?
There are a few common tax traps people with multiple jobs can fall into.
Tax-free threshold
Aussie residents can claim a tax-free threshold on the first $18,200 of income they earn in the financial year. This can get a little confusing if you have more than one job.
“Firstly, if they've not told that second employer that this is their second job, that's a huge thing. You need to ensure that you're not claiming the tax-free threshold in two jobs,” Raso explained.
If you do claim it twice, chances are you’ll end up owing a tax debt as your employer won’t have withheld the correct amount of tax.
Progressive tax rates
Even if you do claim the tax-free threshold on only one job, things can be complicated due to Australia’s progressive tax rates.
For example, Raso said if you were earning $50,000 in one job and $10,000 in a second job, you could end up with a $1,350 tax debt.
That’s because your second employer will normally tax you on the first tax bracket of 19 per cent, plus a 2 per cent Medicare levy.
But since you’ve already earned $50,000 through your first job, you should be in the second tax bracket of 32.5 per cent, plus a 2 per cent Medicare levy.
“So you’re going to underpay tax by 13.5 per cent,” Raso said.
HECS debt
If you are one of nearly three million Aussies with HECS debt, this can also add further problems.
For the 2023-24 financial year, you have to start repaying your HECs debt if you earn $51,550 or more. This starts at 1 per cent of your income and progressively increases to 10 per cent for those earning $151,201 and above.
The rate is based on your combined income, so having two jobs can push you over the threshold to start repaying your debt, or pay it off at a higher rate.
“Say you've got two jobs, so it could be $50,000 in one job and $20,000 in the other. You've got taxable income of 70,000 and neither job has withheld for your HECS debt because they didn’t legally need to and you haven’t reached that amount,” Raso told Yahoo Finance.
If you earn a $70,000 income, your HECS-HELP repayments should be 3 per cent of your salary, which you will need to be paid come tax time.
What can I do to avoid a tax bill next year?
Raso recommends asking your second employer to withhold more tax each pay period to cover any shortfall.
“You need to be diligent and say my income adds up to this together,” Raso said.
“Either ask your employer to withhold additional tax, which they can do, or you’re going to have to put that money aside [yourself].”
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