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This is my first year undertaking seasonal work; while transitioning between jobs I get pay from two companies. Which one is my second income?
How do taxes work? What are the things to be aware of while working seasonal/casually?
I sent your question to Robyn Walker, who is a partner and tax specialist at Deloitte.
She says tax is simple when you are earning a salary and paid the same amount each payday - but things get trickier when your working arrangement is different.
"It is more complex for those earning variable wages and those who work two (or more) jobs," she says.
"We look at income and taxes on a 12-month basis, from 1 April to 31 March for most people, so to ensure that tax is dealt with as accurately as possible during the year it is worthwhile trying to forecast what you think your total income will be for the year. For example, if you expect to earn $50,000 from one job and $20,000 from another, your total income would be $70,000.
"Whenever you start a job you should be asked to supply a tax code declaration. Tax codes are what determines how much tax is withheld by your employer each payday. When working multiple jobs the tax code you select should factor in, if possible, how much you anticipate earning from all your jobs over the year.
"This will allow taxes to be deducted during the year in a way which will hopefully avoid any surprise tax bill at the end of the year. If you're working multiple jobs you will need to decide which one will be your highest source of income, all other jobs will then be treated as secondary income and need a secondary tax code applied."
She says you can change your tax code during the year, so if your main source of income switches, you can adjust this.
She points out that there can be a bit of confusion about secondary tax - you don't pay more tax simply because you have two jobs.
"Secondary tax codes get a bit of a bad rap as people perceive they are being overtaxed, but this is only because secondary income is taxed at a flat rate, being the person's relevant marginal tax rate.
"Taking the previous example, the $50,000 of income from job one will be taxed at progressive rates (meaning some of the income is taxed at 10.5 percent and some at 17.5 percent), whereas the $20,000 earned from the second job will be taxed at the flat rate of 30 percent. This gets you to the right answer because the 30 percent tax rate applies to income between $53,500 and $78,100."
She says the tax form declaration you get from your employer will have a flowchart that you can work through to get the right tax code. There is also a special code for casual agricultural workers.
"If you are not actually an employee, but instead are working as a contractor, you still may have tax withheld. Certain types of contract income do have tax withheld at source, such as agricultural, horticultural or viticultural contract, fishing boat work, forestry or bush work, gardening, and shearing or droving.
"There are specific tax codes set for each type of income. These tax rates are designed to estimate what your correct marginal tax rate should be, however they are not perfect. Fortunately there is the ability for individuals to apply for a tailored tax code which is more suitable, factoring in what you expect to be earning over the entire year."