It’s not unusual for individuals to have more than one job particularly due to the COVID economy. Whether it’s a side hustle in addition to their full time, part-time or freelance job, one of the most common mistakes individuals make when they have secondary income is to try and claim the tax-free threshold from all employers. Knowing your tax obligations is important to avoid penalties.
By claiming the tax-free threshold from all employers—instead of a tax refund—you will end up with a tax bill at the end of the financial year. To avoid a huge tax bill, you’ll need to keep careful records and may need to keep money aside to cover your PAYG tax. This doesn’t just apply to those with a passive income or secondary incomes, but those who also receive government benefits or taxable pensions and also have another source of income.
With an unstable job economy and employers offering casual contracts instead of full-time roles, it’s becoming more common for Australians to have two or more jobs.
As an Australian resident for tax purposes, you are instantly exempt from paying tax on the first $18,200 of annual income. On commencement of a new role, your new employer will provide you with tax forms to complete. It is your responsibility to indicate whether or not you wish to claim the tax-free threshold. If you make a mistake and claim the tax-free portion when you’re already receiving it from another employee, you won’t be paying enough income tax.
The Australian Taxation Office suggests that if you do have more than one job, it makes sense to claim the tax-free threshold from the employer where you earn the most. The second employer should be taxing you at a higher rate.
The only time you can claim the tax-free threshold without putting yourself at risk of a tax bill is if you can guarantee your total income will be less than $18,200 for the financial year (and that includes government benefits, pensions or any other income you receive from rentals, stocks, interest).
If the total amount of tax withheld is more than the amount you owe the tax department, you will receive this in the form of a tax return. If the amount of tax withheld doesn’t meet your tax obligations, you will be expected to pay the outstanding amount.
If your working circumstances change, you can complete an application for PAYG withholding variation so that you are not left out of pocket.
If you have a secondary income and not sure whether you’re:
- Not paying enough tax
- Paying too much tax
- Worried about a huge tax bill
- Not sure how much to set aside for PAYG
- What you can claim on your tax refund
- Not sure if your benefits affect your income
- or just generally confused
Contact us today so we can help you avoid any shocking tax bills at the end of the financial year.
Take the time to research and compare your super premiums to what is offered on the market. If you’re unhappy with the type of cover and the premium prices, you can opt to get extra cover from a different insurance provider. It’s also important to know that you may not be covered if you stop contributing to the fund between jobs or if your super fund becomes inactive.
Whether you’re not sure what your super fund covers you for, how much you’re paying for premiums or if there is a better deal available, we can help you get the best value for your money. Also, be aware if you’ve accrued several super funds by changing employers and opting for their chosen super provider, you could be paying multiple premiums. Let us assist you by making sure you’ve got life insurance cover and your super funds consolidated so that you can live a comfortable retirement and in the event of injury, sickness or death, your loved ones are looked after.