How the Tax-Free Threshold Works If You Have More Than One Job

Taking on a second job has become increasingly common in Australia. Whether you're working weekends, freelancing after hours, or earning extra income through the gig economy, having multiple income sources can help you manage rising living costs. However, many Australians are surprised at tax time when they receive an unexpected tax bill. One of the most common reasons is misunderstanding how the tax-free threshold works when you have more than one employer.

Understanding the rules can help you avoid underpaying tax during the year and make tax time much less stressful.


Tax Free Threshold - Clear Tax


What Is the Tax-Free Threshold?

The tax-free threshold is the amount of income Australian residents can earn each financial year before paying income tax. Currently, the first $18,200 of taxable income is generally tax-free for Australian residents.

When you start a new job, your employer will ask you to complete a Tax File Number (TFN) declaration. One of the questions is whether you want to claim the tax-free threshold. Your answer helps your employer work out how much tax to withhold from your pay.

Can You Claim the Tax-Free Threshold from More Than One Job?

In most cases, the answer is no.

If you have two or more jobs at the same time, you should generally claim the tax-free threshold from only one employer, usually the one paying you the highest or most regular income. Your other employer(s) should withhold tax without applying the tax-free threshold.

It's a common misconception that you can claim the tax-free threshold with every employer. While doing this might mean you take home a little more money each pay, it can also mean not enough tax is being withheld. When you lodge your tax return, you could end up owing money because too little tax was paid during the year.

Why Multiple Jobs Can Lead to a Tax Bill

Each employer calculates PAYG withholding based only on the wages they pay you. They don't know how much you're earning from your other jobs or whether another employer is already applying the tax-free threshold.

For example, imagine you earn:

  • $55,000 from your full-time job.

  • $18,000 from a weekend casual job.

If both employers apply the tax-free threshold, each may withhold less tax than required. At the end of the financial year, your income is combined for tax purposes when your tax return is assessed. If not enough tax has been withheld throughout the year, you may have to pay the difference.

Choosing the Right Employer to Claim the Tax-Free Threshold With 

For most people, it's best to claim the tax-free threshold from the employer who pays the largest portion of their income. If your employment situation changes, for example, your second job becomes your primary source of income, you should update your TFN declaration with your employer.

Reviewing your tax withholding whenever your income changes is a simple way to avoid surprises later.

Can You Change Which Employer You Claim the Tax-Free Threshold From? 

Yes. Your circumstances can change, and so can the job you choose to claim the tax-free threshold from.

For example, if you leave your main job, cut back your hours, or your second job becomes your main source of income, it's a good idea to update your TFN declaration with your employer. This helps ensure the right amount of tax is withheld from your pay.

It's also worth checking your payslips from time to time. If you notice very little tax is being withheld despite earning income from multiple jobs, it may be worth reviewing your tax settings before the end of the financial year.

What About Side Hustles?

Income from freelancing, ride-share driving, food delivery, online selling, consulting, content creation, or other side hustles is treated differently from employment income. In many cases, there isn't an employer withholding tax from these earnings.

If you're earning income from a side hustle, it's a good idea to put some money aside for tax as you earn it. Keeping track of your income and any work-related expenses during the year will also make tax time much easier and help you avoid any unexpected surprises.

Depending on how much you earn, you may also need to meet other tax obligations, such as reporting business income or registering for GST if your turnover reaches the required threshold.

Tips to Avoid an Unexpected Tax Bill

A few simple habits can make tax time much easier:

  • Claim the tax-free threshold from only one employer (unless an exception applies).

  • Keep a record of all the income you earn from different jobs.

  • Check your payslips every now and then to make sure enough tax is being taken out.

  • If you have a side hustle or freelance income, set aside some money for taxes.

  • If you're not sure what applies to your situation, it's worth speaking to a registered tax professional.

Taking a few minutes to review your tax position during the year can save you from an unexpected bill later.

Common Mistakes to Avoid

Some of the most common mistakes include:

  • Claiming the tax-free threshold from multiple employers.

  • Assuming employers know about your other jobs.

  • Forgetting to update your TFN declaration after changing jobs.

  • Not setting aside money for tax on freelance or side hustle income.

  • Ignoring additional income from investments or other sources.

Avoiding these mistakes can help you stay on top of your tax obligations and reduce the likelihood of owing money at the end of the financial year.

Final Thoughts

Working more than one job doesn't automatically mean you'll pay more tax. What matters is your total taxable income and making sure the right amount of tax is withheld throughout the year.

If you want to learn more about how the tax-free threshold works, managing multiple income sources, or staying on top of your tax obligations, visit the Clear Tax website and read our full blog. You'll find practical guides, expert insights, and the latest information to help you understand Australian tax with confidence.

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