Side Hustles, Second Jobs, Extra Income & Tax

Side Hustles, Second Jobs & Tax: What You Need to Know

Looking to boost your income? Whether you're freelancing on weekends, driving for a rideshare service, or working a second job, earning extra money is exciting—but it can come with tax surprises. Understanding your tax obligations is essential to avoid unnecessary headaches and keep more of what you earn.

In this guide, we’ll break down everything you need to know about managing tax on side hustles and extra income in Australia, including:

• When and how to report your earnings
• Tax rates for second jobs
• Essential deductions you might be missing
• Practical tips to save money and stay compliant with the ATO

Let’s help you navigate the world of multiple income streams without the tax-time stress!

Understand Your Tax Obligations

1. Increased Taxable Income: Any money made after deducted expenses from your second job is included in the total income you pay tax on and push you into a higher tax bracket.

Tax-Free Thresholds and Tax Brackets

In Australia, your income is taxed according to specific brackets. If you have multiple income sources, it's crucial to combine them to determine your total taxable income.

(The above rates do not include the Medicare levy of 2%).

Home office expenses -Fixed rate of 67c per hour or % of actual costs.

Note: If you have more than one job, only one employer can apply the tax-free threshold. Your second job will likely have tax withheld at a higher rate to compensate.

Key Tax Deductions to Consider

Having a side hustle or second job often means additional expenses, many of which can be tax-deductible. Some common deductions include:

1. Home Office Expenses: If you work from home, you can claim a portion of your rent, utilities, and office supplies.
2. Vehicle and Travel Expenses: If you use your car for business-related purposes, you may be able to claim fuel, maintenance, and depreciation costs.
3. Internet and Phone Bills: A portion of your phone and internet expenses can be claimed if used for work purposes.
4. Professional Development: Courses, workshops, or subscriptions that help improve your skills in your side hustle.
5. Equipment and Tools: Items such as a laptop, camera, or work-related tools can be deductible.
6. Marketing and Advertising: Costs for promoting your business, such as social media ads or website expenses.
7. Bank Fees and Accounting Costs: If you maintain a separate bank account or hire an accountant for your side business.

Keeping Records: How Long Should You Keep Receipts?

To ensure compliance with the Australian Taxation Office (ATO), it's important to maintain proper records. Generally, you should keep receipts and records for at least five years from the date you lodge your tax return.

Tips for Good Record Keeping:

• Keep digital and physical copies of receipts.
• Use accounting software to track income and expenses.
• Maintain a dedicated folder or app for your side hustle transactions.

Do You Need an ABN?

If you're earning income from a side hustle, you may need to register for an Australian Business Number (ABN). This applies if you are:

• Running your side hustle as a business (not just a hobby).
• Invoicing clients directly.
• Claiming GST credits (if earning over $75,000 per year).

What About Superannuation?

If you're self-employed, you're responsible for contributing to your own superannuation. However, if your side hustle involves working for an employer, they must pay super contributions if you meet the eligibility criteria.

Tax Planning Strategies

To ensure you’re not caught off guard at tax time, consider these strategies:

1. Set Aside Money for Taxes: Save a portion of your side hustle income to cover tax liabilities.
2. Quarterly Tax Payments PAYG: If you’re self-employed, consider making quarterly payments to avoid a large tax bill at year-end.
3. Seek Professional Advice: A tax professional can help you optimize deductions and ensure compliance with tax laws.

Taking on a side hustle or second job can provide financial benefits, but it's crucial to stay on top of your tax responsibilities. Understanding tax brackets, deductions, and record-keeping requirements will help you make informed decisions and avoid unexpected tax bills.

If you're unsure about your obligations or need assistance, contact Fincare Accounting for expert advice on managing your taxes and business financial obligations efficiently.