ATO Tax Bill Warning: How to Reduce Your Chances of Tax Debt When Working Two Jobs

 As more Australians take on multiple jobs to meet financial demands, the Australian Taxation Office (ATO) has issued a warning about the increased risk of accruing tax debt. Working two jobs can complicate your tax obligations, but there are strategies to manage your tax liabilities effectively and avoid unexpected bills.

Understanding the Tax Implications

When you work two jobs, both employers may not withhold enough tax from your income, leading to a shortfall when it comes time to file your tax return. This is because each employer may assume you are only earning income from them and calculate your tax withholding accordingly. Combined, your total income may push you into a higher tax bracket, resulting in a tax bill at the end of the financial year.

Tips to Avoid Tax Debt

1. Adjust Your Withholding Declarations:

   • Inform your second employer that it is your secondary job. You can do this by filling out a withholding declaration form and ensuring they withhold tax at a higher rate.
   • On the Tax File Number Declaration form, you should only claim the tax-free threshold (the first $18,200 of your income that is not taxed) from your primary employer.

2. Regularly Review Your Tax Withholdings:

   • Periodically review your pay slips and ensure that the correct amount of tax is being withheld. You can use the ATO’s online withholding calculator to check if enough tax is being withheld.

3. Consider Additional Voluntary Withholding:

   • You can request your secondary employer to withhold additional amounts of tax from your pay. This can help cover any potential tax shortfall.

4. Keep Track of Your Income:

   • Maintain accurate records of your total income from both jobs. This will help you understand your tax obligations and avoid surprises at tax time.

5. Set Aside Money for Taxes:

   • If you suspect that your tax withholding is not enough, consider setting aside money from each paycheck into a separate account to cover any potential tax bill.

6. Seek Professional Advice:

   • Consult with a tax professional or accountant who can provide personalized advice based on your specific financial situation and help you navigate the complexities of working multiple jobs.

Case Study: Managing Dual Income Effectively

Consider Jane, who works a full-time job and a part-time job. She only claims the tax-free threshold with her full-time employer. For her part-time job, she submits a withholding declaration indicating that it is her secondary source of income, ensuring higher tax is withheld. Jane also reviews her pay slips regularly and sets aside a portion of her part-time income in a savings account to prepare for any additional tax owed.

Conclusion

Working multiple jobs can be financially rewarding, but it requires careful tax planning to avoid accumulating debt. By understanding your tax obligations, adjusting your withholding declarations, and setting aside funds for potential tax bills, you can manage your finances effectively and avoid unexpected tax debts. Always consider consulting with a tax professional to ensure you are on the right track and fully compliant with ATO regulations.