Dummies of the country unite. Tax time cometh, and with it, the Grim Reaper at your door asking for all your fkn cash. Money is a daunting thing, and so are numbers, especially when you get scared at the thought of adding up 7 and 9.
I’m no fool, and neither are you, but tax time can sure makes us feel like one, so here is a guide to dealing with having more than one income that we can understand, together.
Over the course of this whole COVID-19 thing, heaps of us have picked up jobs here and there to make ends meet. Some of us work multiple small jobs, while others have a full-time job alongside a side hustle.
Side hustles can be enticing for the extra dosh, but the threat of owing heaps at tax time is always a fear (at least, to me).
It’s also a bit more complicated than just letting your employer sort it out, so I sought out the help of my accountant Anthony Mackinder, who works for Mackinder Bourne Accountants in North Richmond.
(Why am I, the person who was nearly fooled by a scam ATO call, writing this article? Because I like to learn from my mistakes. And I also like to talk to people much, much smarter than me. My boyfriend would agree.)
Well then, let’s get into it.
Rules To Live By When Sorting Out Your Tax This Year
Rule 1. Misconceptions
Anthony Mackinder explained to me — in simple terms thank heavens — that when you have income that isn’t from full-time work, such as contracting, freelancing or social media gigs that don’t take tax out, it can often feel worse than it is.
“Some people think if you have a second job that you’ll be taxed at a higher rate, but that’s simply not the case,” said Mackinder.
“It just feels that way because when you have a wage job your employer holds the tax for you, but when you earn your own income with an ABN, there’s no one to withhold for you.”
Basically, the money is all the same which is something I didn’t understand before now. If your employers take your tax out, that’s you already paying the Federal Government what it’s owed. If you have other sources of income, it’s now your job to leave some money aside for tax, or else you’ll be hit hard at the end of the year.
Either way, you’re losing the same amount of money. It’s all about perception, you see.
As for tax brackets, well, everything that you earn over $18,200 gets slapped with a 19c fee for every $1 you make, and everything that you make over $45,000 is taxed 32.5c to every dollar.
The tax-free threshold is that first $18,000, but you can only claim it off one employer. No double-dipping in free money, you ratbags.
So, if you’re working two jobs, you’ll be making more money and might be entering into another, higher, tax threshold. At the end of the day here, you’re gonna get taxed on your total income. That’s the entire sum of money that you’ve earned within the time period of July 1 – June 30 (one financial year).
Rule 2. More tax bracket nonsense
So, which tax bracket will you be sitting in with your double earnings?
Well basically, if you make $30,000 from one job and $30,000 from another, you wouldn’t be considering yourself as within the $30,000 tax bracket, paying less tax on both of your earnings.
Instead, you’ll be in the $60,000 zone, which means more money for the government.
It’s important to keep this in mind when your side hustle pays a lot, thus increasing your total earnings. Ultimately though you aren’t being cheated into paying more. You’re earning more, and thus have to pay more tax. Getting a total of $60,000 from two different sources is the same as receiving it from one!
Either way, no matter how you received your total earnings (one job or two), you pay roughly the same in tax. The only slight difference here is that you might be able to claim different things on both jobs. You can also claim travel expenses from one job to the next, giving you a bit less tax to pay at the end of the day compared to someone making the same as you from a single job!
The more you know.
Rule 3. Dabbling in some side money
Most of the time side hustles don’t earn you as much as your main hustle, and so I asked Mackinder whether or not problems (paying more tax) can arise even if your money on the side is not that much.
“If you’re earning in the $100 a week area [in your second job], there aren’t going to be any major sort of implications. You can really have as many sources of income as you want, you’re not disadvantaged because of it,” said Mackinder.
According to Mackinder, it’s absolutely fine for you to have multiple side hustles, be they monetised hobbies or business-related ventures. Making and selling things, working for multiple companies, freelance work, OnlyFans — it’s up to you.
And you can absolutely claim every single expense associated with each individual job at tax time such as internet costs and phone bills if you operate from your personal devices. You can also claim working from home expenses! Win, win.
Rule 4. Rules
Having a second income that doesn’t take tax out comes with a certain set of rules. Ones that you’ve gotta follow if you don’t wanna be blindsided at the end of the financial year.
Mackinder offered some tips and tricks for those of us who desire more than one income without the bad parts.
“If you have an ABN, keep track of your expenses,” he said.
“Anything tied to your job can be a deduction, keep a record of everything you spend.”
I know it sounds like a lot of work, but it’s worth it. Mackinder also said that your accountant can help you keep track of everything that is specifically important to you and your work, and that there are apps that you can download to make things wayyy easier, which is nice to know.
Also, just hold onto those damn receipts.
Rule 5. Social media income
If you’re an influencer or content creator online, chances are you already know about how great it is to get some sweet, sweet money on the side from social media. I however am not, and was hella curious about this, so I asked about it and how it works.
Ultimately social media income can be added to your tax-time claims, and you can actually knock quite a bit of money off your tax due to internet costs and data plans.
All money is taxable in the eyes of the government, but (on the side) social media money won’t often be large enough to really put a dent in your EOFY taxes.
“It’s definitely worthwhile putting [social media jobs] in your return,” Mackinder said.
“If it’s work from your computer or phone, you’ll be able to deduct those expenses. Even internet, phone data and a percentage of your plan. Any expense incurred to lead to that income matters.”
Congrats influencers on the multiple claims that await you.
As for us small fry, it looks like getting that second job won’t really hurt us in the long run. It’s all about being smart, keeping track of expenses and getting that money, honey.
I don’t know about you but I’m feeling ten times more intellimigent than I did before. Second job here I come!