Is a second job worth it?
Is it worth it?
Is a second job worth it?
In an Uber the other day, the driver revealed that he had become a driver to pay for his second mortgage. He invested in property but with interest rates spiking, the only way he could hold onto the property was to earn additional income. His “day job” starts early and ends at 3pm at which time he heads off to start driving.
He is not alone. The latest stats from the Australian Bureau of Statistics reveal that the number of workers holding multiple jobs has increased by 2.1% since December 2022 – in total, Australia has 947,300 people holding multiple jobs or 6.6% of the working population.
The reason why people take on second jobs is varied. For some, it is to manage increasing costs, for others it is to start up a new venture but with the security of a regular income stream from their primary occupation.
Is it worth it?
From a tax perspective, Australia has a progressive income tax system – the more you earn the more tax you pay, and access to social benefits tapers off. It’s important when looking at a second job to understand your overall position – how much you are likely to earn, your costs of generating income, and what this income level will mean.
The trap for many picking up a ‘gig economy’ second job is that they are often independent contractors. That is, you are responsible for managing your tax affairs. All Uber drivers for example, are required to hold an ABN and be registered for GST. There is a compliance cost to this and from a cashflow perspective, 1/11th of the fee collected needs to be remitted to the Tax Office once a quarter. It’s important to quarantine both the GST owing and income tax to ensure you have the cashflow to pay the tax when it is due. The upside is you can claim the expenses related to your second job.
If you are taking on a second job, ensure that your tax-free threshold applies to your highest paying job from a PAYG withholding perspective.
When does a side hustle constitute a business?
The distinction between something you do on the side (e.g. content creator and Uber driving) and carrying on a business can be a fine line. There is no one test to determine whether you are carrying on a business versus a hobby, but the following factors go toward determining whether what you are doing is a business or merely a hobby:
- regularity of your transactions;
- whether or not you are promoting yourself as a business (developing a brand name);
- if you engage in marketing activities:
- whether you intend to develop a business and make a profit (or have the capacity to generate a profit over time);
- the size, scale and permanency of your activities; and
- whether you operate in a business-like manner.
If your activities are just a hobby then the income is not assessable, and the expenses are not deductible. If you are carrying on a business, then you need to declare the income earned but you also get to claim deductions for the cost of the business activities (although an analysis is required to determine whether some expenses can be deducted upfront or over a period of time).
Generally, once you earn or expect to earn $75,000 or more per annum, you will need to register for GST. The exception to the $75,000 threshold is ride-share drivers who must have an ABN and be registered for GST regardless of how much they earn.
The ATO has put together a webpage with lots of information about side hustles and what you may need to bear in mind when it comes to the tax obligations – click here to read.
How can we help?
If you’d like help setting up a business, Marsh & Partners can assist. Our business specialists can go through the pros and cons of all the options so you can make an informed decision. We can also take care of the legal set up, registrations and help you organise an accounting system so you can get on with doing what you love.
You can get in touch with one of our business specialists on 07 3023 4800 or at mail@marshpartners.com.au
You can find out more about working with Marsh & Partners here. As your Absolute.Account.Ability partner we’re on a mission to make your business life better.
