It’s important to know how the tax-free threshold works, especially if you’re earning income from more than one job.
Many people mistakenly claim the tax-free threshold from multiple employers, which can lead to an unexpected tax bill.
This guide will help you understand how to manage the tax-free threshold while juggling multiple sources of income, so you can keep your finances in check.
The tax-free threshold allows you to earn up to $18,200 each year without paying any tax. It’s a great benefit for Australian residents, especially for those on lower incomes. Understanding how this threshold works is key to making sure you’re not caught off guard when tax time rolls around.
It’s important to remember that the tax-free threshold applies to your total income, not just what you earn from one job. This includes:
You can only claim the tax-free threshold from one employer at a time. When you start a new job, your employer will ask if you want to claim the tax-free threshold. If you’re already claiming it from another job, you should let them know by answering “no.” This will help you avoid any tax-related issues later on.
If you mistakenly claim the tax-free threshold from more than one employer, you might not have enough tax withheld from your total income. This can happen if:
When this happens, you could end up with a tax bill that needs to be paid as a lump sum at the end of the financial year. No one likes surprises like that, so it’s best to get it right from the start.
To steer clear of any tax surprises at the end of the financial year, here’s what you can do:
If you have a study or training support loan, like a HECS-HELP or SFSS loan, it’s important to let each of your employers know. You’ll need to make compulsory repayments if:
You’re always welcome to make voluntary repayments to reduce your study loan balance. But remember, if your repayment income is above the threshold, you’ll still need to make compulsory repayments even if you’ve made voluntary ones.
If you earn income as an employee and also as a sole trader or through online platforms, managing your tax is crucial to avoid surprises.
As an employee, your employer takes care of withholding tax from your pay. But as a self-employed individual, you’re responsible for the tax on your business income. To avoid a big tax bill at the end of the year:
Understanding and managing the tax-free threshold is key to staying on top of your finances, especially if you have multiple sources of income.
By claiming the tax-free threshold from only one employer and carefully managing any study loans or additional income, you can avoid unexpected tax bills and keep your financial situation under control. If you’re ever unsure about your tax situation, don’t hesitate to seek advice from a tax professional.
IMPORTANT NOTICE
This blog post contains general information only and has been prepared by Allworths without reference to your objectives, financial situation or needs. Allworths cannot guarantee the accuracy, completeness or timeliness of the information contained here. By making this information available to you, we are not providing professional advice or recommendations. Before acting on any of the information contained here, you should seek professional advice.