How to apply the correct tax rate for a second job

February 20, 2024
minutes to read
Justin Bohlmann
Table of Contents

Having a second job or a side hustle can significantly increase your income, but it can also impact the tax bracket that applies. If you are working and operating a side hustle or multiple businesses simultaneously, it's important to understand the tax implications of having different income streams. This guide will cover how to accurately track income from various sources to ensure you are paying the correct amount of tax to stay compliant.

The popularity of having multiple businesses or augmenting a regular salary with a side hustle has grown in recent years. Due to various factors, including the need for financial stability, the desire for personal fulfilment, and the rise of the gig economy, many people are turning to multiple jobs or side hustles to supplement their income and gain new skills. With work becoming more flexible and autonomous and the prevalence of new tools, it has never been easier to generate multiple income streams.

A common misconception is that having multiple income streams creates different tax implications. However, your taxes are based on the total income earned during the year, regardless of how many jobs, businesses, or side hustles you have. The taxes you owe are calculated based on your total income and any applicable deductions, which are reported on your annual tax return. Each income source is usually tracked separately on your BAS or tax return, but it does not increase your overall tax liability.

When applying the tax rate, the rate used for a second job or business is the same as for your primary income stream. Your income from all sources is combined, and the total amount is used to determine your tax bracket and the amount of tax you owe. In simple terms, earning $200,000 from a single business is the same as making $200,000 split across two jobs and two side hustles. Either way, you earned $200,000, which is what your tax will be based on.

The progressive tax system in Australia means that the more you make, the higher your marginal tax rate will be. You can use Thriday’s accounting and tax calculator to determine your current estimate quickly and predicted end-of-year position. Any income you earn is automatically reconciled so you can see what you owe in real-time. Thriday even determines what deductions you can claim. In addition, you can create multiple sub-accounts to directly track income for different businesses, jobs or side hustles.

Tracking your income from multiple jobs helps to ensure you are paying the correct amount of tax. Failing to report income from a second job or business can result in penalties and fines from the ATO. It is also essential to track your income to ensure you are paying the appropriate amount, as you may be eligible for a tax refund if you have paid more in taxes throughout the year than you owe. This can happen if you have too much withheld from your pay or received a tax credit or deduction that you were unaware of.

Having a second job or business in Australia does not impact your tax rate directly, but how much income you earn does. It's essential to understand the tax implications and to track your income from all sources, as the more you earn, the higher the tax bracket you will fall into. The tax rate for a second job is the same as for your primary job, but additional tax may be due if your combined income from both jobs pushes you into a higher tax bracket. It's important to use a tool such as Thriday to determine the amount of tax you owe, and it's essential to track your income from multiple jobs to ensure you are paying the correct amount of tax each year.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360 AFSL 241167 (Regional Australia Bank). Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you. Team Thrive No 2 Pty Ltd ABN 26 677 263 606 (Thriday Accounting) is a Registered Tax Agent (No.26262416).

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