Five financial pitfalls of working a second job


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Chris, who preferred to use only his first name, is one of a growing number of Australians working more than one job.

His 'day job' is in retail, while after hours and on weekends he works a side hustle as a photographer. Chris is one of almost one million Australians with multiple jobs according to the Australian Bureau of Statistics (ABS).

Bjorn Jarvis, ABS head of labour statistics, says, "The number of multiple job-holders reached a record high of 947,000 people in the March quarter."

microstock stock photos photo photographer shutterstock make money selling photos side hustle side business extra cash

It's the highest figure since the ABS began collecting this data in 1994.

"It means that around one in fifteen people now have more than one job," Jarvis says.

More of us are likely to join their ranks. According to Finder research, one in five Australians are thinking about taking on extra work to keep our heads above water.

Chris, a recent first home owner, says that the extra cash helps to manage home loan repayments. But it's not just about the money. He's hoping the photography gig will eventually generate enough income to become his only job.

The multi-job traps

Working multiple jobs may fatten your wallet over the short term. But it doesn't always stack up financially, especially after allowing for tax. Here are five pitfalls to watch for:

1. More income means more tax

Workers can usually claim the tax-free threshold on the first $18,200 of income earned in a year. But that threshold only applies once.

If you take on a second job and tick the box to claim the tax-free threshold, chances are you'll end up owing a tax debt as your employer will be withholding insufficient tax.

Letting the payroll or HR department at your second job know they need to withhold more tax from each pay will help you avoid a tax debt, though it can mean less take home pay.

2. A side gig can lead to a tax debt

The big tax risk comes if you are earning income from a side hustle on which zero tax has been withheld.

As a guide, let's say Deb works as a hairdresser by day. In the 2022/23 financial year Deb's wages totalled $50,000, and her employer withheld $7,717 in tax.

Assuming Deb has no work-related tax deductions, her tax for the year would look something like this:

  • Taxable income: $50,000
  • Tax on income: $6,717
  • Medicare levy: $1,000
  • Less Low Income Tax Offset -$250
  • Total tax payable: $7,467
  • Tax paid: $7,717
  • Tax refund: $250

After allowing for tax plus Medicare, and the $250 Low Income Tax Offset (LITO), Deb owes $7,467 in tax. As she has already paid tax of $7,717, Deb pockets a tax refund of $250. Sweet.

Now let's say Deb started a side hustle doing hair and make-up for weddings which saw her earn an extra $15,000, taking her taxable income up to $65,000. This would make her tax position look more like this:

  • Taxable income: $65,000
  • Tax on income: $11,592
  • Medicare levy: $1,300
  • Less Low Income Tax Offset: -$25
  • Total tax payable: $12,867
  • Tax paid: $7,717
  • Tax owing: $5,150

Deb's higher income has inflated her tax bill to $12,867. As she has only paid tax of $7,717, Deb faces a tax debt of $5,150.

The only way around this is to set aside income from a side gig to pay a possible tax bill.

3. Additional income can trigger HECS payments

If you have a student debt, a second job could push your income over the line to either start repaying the debt, or pay it off at a higher rate.

The income threshold for HECS HELP repayments for 2022/23 was $48,361. This financial year the bar has been raised to $51,550.

4. You could lose support payments

The additional income from a second job can impact your eligibility for a range of support payments - everything from childcare subsidies through to family tax benefits.

5. You could be pushed into a higher tax bracket

Individual tax rates are set at different tiers depending on your taxable income. The more you earn, the more tax you pay on that portion of taxable income that falls within your highest income tax bracket (not your entire income).

For instance, if you earn between $18,200 and $45,000, you pay tax of 19 cents on each dollar earned over $18,200.

However, if a second job pushes your income over $45,000, you end up in the next tax bracket, where every extra dollar earned is taxed at 32.5 cents. That's great for the tax man, but not so good for your after-tax income.

Weigh up the benefits

Working a second job can put you in front financially. Another job can bring extra work-related tax deductions plus additional employer-paid super contributions.

The trick is to be sure the added income is worth the effort. Working multiple jobs can take a toll, potentially impacting your performance in your main job, not to mention axing your social life.

On the other hand, it can be an opportunity to develop new skills, or as Chris is hoping, it can turn a much-loved hobby into a growing business.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.