The soaring cost of living has millions of Aussies considering second jobs but just by ticking the wrong boxes on your tax forms, you could end up with a tax debt at the end of the income year.
The Australian Taxation Office (ATO) has issued a warning to people working a second job: make sure you only claim the tax-free threshold from one employer.
Also read: 15% or 45%: How much tax will you pay?
— ato.gov.au (@ato_gov_au) June 6, 2022
The tax-free threshold is the set amount of income that is not taxable. Currently set at $18,200, no taxpayer is meant to pay a cent of tax on this portion of income.
As such, claiming the tax-free threshold reduces the amount of tax withheld from your income.
When filling in a tax file number (TFN) declaration, Australian residents can choose to claim the tax-free threshold from their employer.
If you tick this box, you will not pay tax when your income is below $18,200. Your employer will start withholding tax when you earn above $18,200.
According to the ATO, you should only claim the tax-free threshold from one payer, and this should usually be the payer you receive the most money from.
This includes payments from an employer, taxable pension or government allowance, or money earnt as sole trader, contractor or some other kind of business structure.
It’s important to advise your other payers that you won’t be claiming the tax free threshold, according to the ATO.
While this means you will be charged tax at a higher rate, it minimises the chance you’ll end up with a tax debt at the end of the financial year.
However, there are some exceptions to this rule.
For example, if you are sure your total income from two employers will be $18,200 or less, you can choose to claim the tax-free threshold form both payers.
Australians are looking for extra income
Research by freelancing website Fiverr revealed a third of Australians had considered a second job in response to rising cost-of-living pressures.
One in 12 of the 1,000 participants surveyed were already juggling a second job, according to the research.
Some of the popular freelancing jobs Aussies are considering to help boost their earnings include administrative work (27 per cent), cryptocurrency investment (22 per cent), ecommerce (14 per cent) and copyrighting (13 per cent).