Can I Claim the Tax-Free Threshold at Two Jobs?

Can I Claim the Tax-Free Threshold at Two Jobs?

Over the past decade or so, we’ve seen shifts in the workplace. One of these shifts is an increase in multiple-jobholders.  

It’s no longer odd to see a father at home with the kids on a Monday afternoon, a woman owning a billion-dollar company, or people (male or female) working for more than one employer at a time. No matter what the job situation may be, we all have one thing in common that we need to prepare for; taxes.

The ATO has created an income limit known as the tax-free threshold. This allows Australian workers to not be taxed on income earned up to a certain point. That limit is $18,200.

So, how do you claim this tax-free threshold at two jobs? Well, it depends.

How much of an income are you earning?

The ATO typically allows you to only claim the tax-free threshold from your primary source of income, or in other words, the job that earns you the higher salary.

If you have a secondary job that earns you a bit less income, that employer will withhold tax at the higher, ‘no tax-free threshold’ rate.

Is there an exception to the rule?

Isn’t there always? According to the ATO, if you are absolutely positive that your total income between both jobs will be less than the tax-free threshold of $18,200, then you can choose to claim the tax-free threshold at both jobs. Be extra careful when making this decision. If your second source of income causes you to exceed the threshold amount and wasn’t withheld at a higher rate of tax, then you could be faced with a tax debt at the end of the financial year to make up for the difference.

Let’s take a look at Brady’s tax situation:

Brady is employed as a nurse at his local hospital part-time. He also works the night shift as a doorman for a little extra income. As a nurse, he earns $12,000 per year, while the doorman gig earns him $6,000 per year. Together, this equals out to be less than the tax-free threshold. Therefore, he can claim the exemption from tax on both sources of income.

 

What if your primary source of income (alone) exceeds the tax-free threshold?

This is pretty common and nothing to worry about. Your employer should be familiar with this. Once the tax-free threshold is met for the year at your primary job, your employer will begin withholding at the tax rate associated with your specific tax bracket. This will be done automatically so that you do not need to keep track of each and every dollar earned.

Let’s take another look at Brady:

Starting this month, Brady was offered a full time nursing position with a raise and left his position as a doorman. He is now earning $30,000 per year. He can still claim the tax-free threshold at his nursing job, for his earnings up to $18,200. Once that threshold is met, his payer will begin taxing the remaining income at the ATO rate based on his total annual income.

 

So, how can you avoid overpaying or underpaying tax?

There are certain precautions that you can take so that you are paying just the right amount of tax:

  • Do not claim the tax-free threshold on the TFN declaration for both jobs. This is a standard form that you must complete when starting a new job. In Box 8, you are given the option of whether or not you will claim the tax-free threshold. Unless you earn under $18,200 at both jobs combined, you’ll only tick YES for your primary job (again, the one at which you earn more total in a year).
  • Know how much you earn in a year. This is important for more reasons than one. Whether you want to make sure you are being taxed correctly or think it’s time to negotiate a raise with your employer, this yearly figure, big or small, can mean a lot. It figures in all the calculations above – whether to claim the tax-free threshold at more than one job, as well as how much tax you expect to pay.

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12 Responses to “Can I Claim the Tax-Free Threshold at Two Jobs?”

  1. Nevaeh Hurae says:

    Hi, I just recently found out that I have not been claiming taxfree threshold for every job I have worked at for the past 5 years but then was told that, when you fill out your form for tax you are ment to claim if it is your only job you are working at and maybe I should see a tax agent to do my tax and look at my past years tax returns aswell I am confused I just never claimed it as I thought you could only claim it if you are not going to make over the threshold

  2. James says:

    Hey, I’ve just been offered another job as a casual employee, I’m currently working 6-10 hours a week and willl be offered around 10-20 hours a week at the new job. My old job has said they still want me to do two hours on Sunday once a fortnight and two hours on a Wednesday weekly. What should I do regarding tax and what’s the best option for my case.
    Thankyou!
    James

  3. Tax Advisor says:

    If you have not claimed it in the previous years, within your return it should indicate that the tax free threshold was automatically taken into account to reduce your total taxable income. Rest assured if you have reported your income accurately there should be no need for concern with not claiming the tax-free threshold. It’s best that you claim this threshold from now on, so that as much of the threshold becomes available for you to use throughout the year. The threshold rates can be found on the ATO Website for the specific prior tax years.

  4. Tax Advisor says:

    Depending on the total salary you are earning, if your highest paying job has a salary of less than the tax-free threshold of $18,200 for the year, you should claim the tax-free threshold for that specific job transcript. If however both of your income earned at the two places of employment exceeds $18,200, it’s best not to claim the tax-free threshold for both jobs. Only if the combined income is less than $18,200 is it advised for you to claim the threshold for both jobs.

  5. Michelle says:

    If i am getting taxed on my second job at 45% (or whatever it it) will i get the difference back at the end of the tax year? So if my annual income doesn’t exceed the highest level, do i get my tax back on the extra tax i paid??

  6. Tax Advisor says:

    Depending on the overall income that you earn, after you have taken your deductions, you will have a total tax that is due. If you have overpaid, you will receive back a return. Generally, it is best not to claim the threshold on both jobs, as it may result in your owing the ATO because only the first $18,200 for the season 2015-2016 of your income is tax-free if you are a Australian Resident. You can view these the thresholds for all years through the ATO website.

  7. Two Jobs says:

    I work two jobs that both pay around double the tax-free threshold. Is it illegal to claim the tax-free threshold on both, accrue interest on the difference in a high-yield savings account, and then pay the tax man a lump sum as late as possible (lodging the return at the end of October, then paying the liability on its due date)?

    I’m capable of managing my finances such that there’s zero risk of me not having the money when it is time to pay, and to be honest, I’d rather the money be working for me, than overpaying the ATO and getting it back as a tax return.

  8. Tax Advisor says:

    I advise that you follow the instructions on the withholding declaration form, however, it is still up to your discretion.

  9. contractor and employee says:

    Hi,
    I have an ABN and I earn about $17000 doing contract work.
    i have just started another employed job worth $23000.
    what am I best to do with TF threshold? Dont claim it from my employer so I dont have to pay tax on my business earnings, or do I have to (or should) claim it from my employer and then pay tax on my business earnings?

  10. Tax Advisor says:

    If you claim the TFH for your business, as a sole trader, it will become your responsibility to pay the proper amount of taxes due when you lodge, as all of the income was not taxed and you received the full amount. If you, however, choose to claim the tax-free threshold for your ABN contract work and not claim on your employed work, you will have the proper amount of taxes withheld, which will end up resulting in a low tax due or a return when you lodge.

  11. Michael Smith says:

    I have worked now 3 jobs within this week and have always ended one before starting another, can i claim tax back from all 3 jobs, it would exceed the 18000 on one of the jobs but the others it wouldnt, really confusing for me. cheers

  12. Tax Advisor says:

    Hello Michael,

    You may claim the tax-free threshold only if all of your income is collectively less than $18,000 for the year. This would not be determined by each job separately. You would most likely not be able to claim the tax free threshhold since one of your jobs has already exceeded the $18,000 threshold. Whether or not you can get the taxes back is determined on your tax return.

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