Question 1. I work 30 hours a week in my job. I have an opportunity to pick up a second job, for about 10 to 15 hours a week but I’ve been told that the tax on my second job will be a lot higher. Is that correct?
This is a common misconception.
The Australian Taxation Office doesn’t care about how many jobs you have, or how many different sources of income you have, it just need to know how much your total taxable income is.
The only truth to it is that the more income you earn, then yes, the more tax you pay.
As Australia has a progressive tax system, then the rate of tax for some of your income may be higher (see tax table below).
When you commence a job, you need to fill out a form that helps determine how much tax is taken out of your pay each cycle (depending on whether you get paid, weekly, fortnightly etc.).
Generally, within the form, you would tick a box to indicate that you are eligible for the tax-free threshold of $18,200, this applies to all Australian residents.
This then sets how much ‘Pay As You Go’ (PAYG) tax is deducted from pay each week/fortnight. The PAYG schedule is set by the ATO and must be followed by the employer.
For a second, subsequent job you would not tick the box about claiming the tax-free threshold as that has already been taken into account. Therefore, the PAYG rate would be higher and so it seems you are paying a higher rate of tax.
At the end of the financial year (June 30), when you or your accountant do your tax return, all of your income is added together to work out how much tax is payable, less the PAYG tax you have already paid.
Note: I do know a few people who don’t tick the tax-free threshold box even for their first and only job. Some people do that by accident and others do it deliberately as a way of ‘forced’ saving, knowing they will get a bigger refund come tax time because they have paid too much PAYG tax.
Another way of looking at it is to consider that PAYG tax is just you making regular payments to cover your end of your tax obligations. But regardless of how many jobs you have, all the income is added together, and tax paid as per the below table.
If you are interested, the ATO does have some PAYG calculators available.
Question 2. We have an investment property which we may need to sell at a loss. How does this affect tax if we make a loss?
There is no immediate impact on your overall (income) tax.
When you complete your annual income tax return there is a section that asks about capital gains and capital losses.
You record your capital loss in that section – if you have a capital gain you can immediately subtract the loss against the gain.
If the loss is bigger than the gain, or if you do not have any capital gains, you carry forward to the next year, if still no gain, keep carrying it forward every year until you (hopefully) do.
Carry-forward losses can only be used to offset capital gains, not regular income.
For example if you sold your investment property and made a $50,000 capital loss but also sold some shares that made a $20,000 capital gain, the capital loss wipes out the capital gain and you still have a $30,000 loss which can be offset against future capital gains.
The capital loss can be carried forward until you have enough gains to offset it against, or until you die, whichever is sooner.
If you or your accountant are doing your tax return online, your unused capital loss will automatically pop back up in future years to remind you of it, however, it’s always a good idea to keep your own records, and it’s even more important if you still complete your tax return by paper.
Question 3. I am about to inherit some shares (about $150,000 value). They were purchased about 15 years ago and have all appreciated. If I sell them all as soon as I receive them, can I spread the Capital Gains Tax payable over a number of years?
Once you sell the shares then this will trigger a capital gain. Tax on the capital gain will become payable at the end of the financial year once you complete your tax return.
The only way to spread the capital gains over multiple financial years would be to sell down a portion of the shares each year.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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