Second job tax: why you get taxed more, and how to avoid a bill

Picked up a second job and noticed a big chunk of tax coming out of it? That's by design. Surprisingly, even with the higher rate, a small second job often still doesn't withhold enough, and claiming the tax-free threshold twice makes it much worse.

One threshold, not two

The first $18,200 of your income each year is tax free, but only once across all your jobs. That's why you should claim the tax-free threshold with your main employer only. Your second employer then withholds tax from the first dollar at a higher rate.

An example

Say your main job pays $60,000 and your second job pays $20,000 a year, both fortnightly.

2026–27 ATO withholding formulas (scale 1 and scale 2), resident rates, Medicare and low income tax offset, no HELP. "Extra tax you actually owe" is the tax on $80,000 minus the tax on $60,000.

Even set up correctly, the second job's formula assumes a fairly low income, so it withholds less than the 32% your extra dollars are actually taxed at. That leaves a gap of about $2,912. Claim the threshold on both and almost nothing comes out, so the bill grows to roughly $6,344.

How to avoid the bill

Ask your second employer to withhold extra tax each pay. Using the example above, about $112 more a fortnight would cover the gap. You can also set that money aside yourself in a savings account so it's ready at tax time.

HELP debts

If you have a HELP debt, tell both employers. Each one withholds repayments based on its own pay, and your total repayment is settled at tax time based on your combined income.

Try it: untick the tax-free threshold