Yahoo Finance Major tax issue leaving Aussies with $3,000 debts: ‘Frustrating’
Aussies who work multiple jobs are being hit with tax debts and neither them nor their employer are at fault.
A fault with Australia’s payroll system means thousands of Aussies are being stung with tax debts. A tax expert said she is seeing people working multiple jobs hit with tax bills worth thousands.
Tax Invest Accounting director and registered tax agent Belinda Raso told Yahoo Finance the fault meant Aussies weren’t paying enough tax on their second jobs. She said this is through no fault of their own or their employer.
“These past two years especially there has been so many people coming through with second jobs and they all say the same thing, ‘I’m doing it just to get by and now I’ve got a tax debt’,” she said.
RELATED
ATO warning over $4,250 tax deduction millions can claim: ‘Surprising’
Centrelink recipients warned over ‘bonus’ cost-of-living payment
Gen Z trend sparks fear among Aussie pub owners: 'Worst in 40 years'
“We’re seeing over $3,000 for most people and it’s because they’ve had to get more than one job. It’s really sad when you hear them crying on the phone.”
The number of Aussies working multiple jobs rose to 974,000 in March, representing about 6.7 per cent of all employed people.
A recent Indeed survey found one in 10 white-collar workers were now taking on two full-time jobs just to get buy, while a Finder survey found millions felt financially pressured to look for a second job this year.
Do you have a tax story to share? Contact tamika.seeto@yahooinc.com
Why are people getting tax debts?
Raso said the fault means a person's second employer often doesn't withhold enough tax during the year, even when they are not claiming the tax-free threshold twice.
She gave the example of an employee who earns more than $45,000 in their main job and earned $20,000 in their second job.
The second employer will normally correctly tax you on the first tax bracket of 16 per cent, plus a 2 per cent Medicare levy.
But since you’ve already earned $45,000 through your first job, you should be taxed in the second tax bracket of 30 per cent, plus a 2 per cent Medicare levy. However, she said the payroll system doesn't allow you to easily do this.
“In most cases, it’s literally our system that’s hurt them … We’ve got an option of choosing no tax-free threshold for claiming the tax-free threshold. There’s no other option,” Raso told Yahoo Finance.
“Even when everybody does everything right, we still get tax debts. This is where it is getting frustrating.”
If you have a HECS debt, this can also be a reason you get a tax debt. Your HECS repayment rate is based on your combined income, so having two jobs can push you over the threshold to start repaying your debt, or to pay it off at a higher rate.
How can Aussies avoid tax debts?
Unfortunately, Raso said tax agents weren't able to get rid of these kinds of tax debts.
To avoid the tax debt in the future, Raso said Aussies with multiple jobs should ask their second employer to withhold more tax each pay period.
“You need to be diligent and say my income adds up to this together,” she 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].”
Get the latest Yahoo Finance news - follow us on Facebook, LinkedIn and Instagram.
