Tax Free Threshold & Multiple Jobs

What is the tax-free threshold?

Is the amount of income you can earn before you have to pay income tax. Most residents can claim this for the first $18,200 of their income each financial year.
By claiming the tax free threshold – this reduces the amount of tax withheld from your income.
$18,200/year is the same as earring $350 a week or $700 a fortnight or $1,517 a month.

How to claim the tax-free threshold?

When starting a new job, your employer will ask you to fill in a Tax File Number Declaration form – this is where you can choose to claim or not claim the tax free threshold.

How about when you have multiple jobs/employers?

The Tax Office advises that if you have multiple jobs, to only claim the tax-free threshold from the payer who pays you the highest wage and then to not claim the tax-free threshold from others.
If you follow this advice, other payers will withhold tax at a higher rate meaning that during tax time, this reduces the chances of you having a tax bill/debt – as any extra tax has already been withheld.

If however you are disciplined enough, I would claim the tax-free threshold with all payers/employers. This means more money in your pocket during the year – this can mean more money for longer in your offset account (reducing interest paid on the loan) or more money in the High Interest Savings Account (more interest earned). However when tax time comes around, you will likely be in tax debt and have to pay back the extra tax based on your marginal tax rate.

The important thing to note is: regardless if you claim the tax free threshold or not from multiple employers, you will still end up paying the same amount of tax regardless.

You can change your status on claiming the tax-free threshold by lodging a PAYG withholding variation application.

But I heard from a friend, if you work a second job you get taxed more?

This is a MYTH.

If Jackie has 1 job and earns $60,000. He will pay the same amount of tax if he had earned $50,000 from 1 job and $10,000 from his 2nd job.
Another example is if Mark earned $100,000 from his 1 job.
He would pay the same amount of tax if he had 3 jobs, 1 that paid $70,000, a 2nd that paid $20,000 and a 3rd that paid $10,000.

Income tax is calculated based on the total income earnt by a taxpayer in the whole financial year.
Where the misconception lies is when you get a second job and tax has been withheld at a higher rate on purpose (by not claiming the tax free threshold). This stops you getting a tax bill at the end of the year and you will end up receiving back the money you are entitled to at tax time.