In short, the answer is no! While it might seem like you do, when you break it down and consider how tax is calculated, you’ll see that you don’t actually pay more tax on your second job.
So how is tax calculated?
Income Tax works on a sliding scale. For a working resident of Australia in the 2022 financial year, the tax rates table looks like this:
To calculate tax payable, we need to add all sources of income together, then subtract allowable deductions to calculate your taxable income.
Tax is then calculated on your total taxable income at the rates above.
So why does it feel like the second job is being taxed more?
This is because of the tax-free threshold. Australian residents for tax purposes are eligible for a tax-free threshold of $18,200. This is applicable on your total income. When working multiple jobs at once, you have the choice on whether to claim the tax-free threshold on one or both jobs. The recommendation is to claim the tax-free threshold only on your highest earning job. The reason for this is that claiming the tax-free threshold on both jobs essentially means throughout the year you have claimed a tax-free threshold of $36,400 and come tax time you’re likely to end up with a tax bill.
It may feel like you’re being punished with extra tax for working a second job, but in reality, you’d still pay the same amount of tax if you earned all of that income from one job.
I hope this helped. Tax Myth 001 has been busted! Stay tuned for more blog posts here at Hervey Bay Tax Solutions.
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