Earning on the side - is it really worth it?

For most of us, the idea of earning a little extra money on top of our regular wage is a very attractive prospect. Sometimes it's a matter of necessity to pay the rent on time, and at others it's the pleasant side-effect of a hobby we love doing. Either way, there are some important considerations you need to think about before turning your hand at boosting the home coffers.

How taxing is your second income?

Before you start earning extra money on the side, it's worth doing some calculations to figure out whether you'll actually be making as much as you think you will. The tax-free threshold (currently $18,200) applies to your income as a whole and will already be claimed by your main job, so every dollar you earn in your second job will be taxed. Keep in mind that:

  • if your second income is from a second job, your PAYG income should be taxed at the highest rate (46.5% including Medicare levy for the 2013/14 financial year). This means you'll receive less in hand, but could receive a very tidy tax refund when it's adjusted at tax time;
  • if your second income is from a hobby or home business, you'll be required to declare your earnings and pay tax according to your total taxable income for the year (your salary plus extra earnings), so keep some money aside each month or you could be in for a rude shock when you receive your tax bill.

Check the current year's tax brackets at the ATO website and do your sums.

At the end of the day, even if your second income isn't as rewarding as you'd anticipated, if you're doing something you enjoy or building a business that you hope will become your main income in years to come, you may consider it time and effort well spent.

Will it impact your current job?

You may not be required to inform your employer that you're taking a second job or earning an income outside of work, but it's well worth looking at your contract to see how a second job could impact your current position or vice versa. Some contracts may prohibit you from working in the same field, especially if you're privy to sensitive company information and the second job could cause a conflict of interest. Other contracts may have an intellectual property clause for all your work during your period of employment, extending even to work outside the office. To be on the safe side, check your contract and consider chatting to your manager.

Will it affect your income protection insurance?

If you have income protection insurance, unless it's specified as part of your policy, your second source of income will most likely not be covered. If you want your additional income to be taken into consideration in your policy, you'll need to contact your insurer to see if it's possible, and how it will impact the cost of your current policy.

Other considerations

Apart from the tax implications, a second job is bound to have an impact on your relationships as it will take your time and energy. Consider all the aspects of a second job and consider discussing it with those in your life it may affect. If it's something you're certain you want to pursue, then go for it and good luck.

To find out more about your tax obligations, go to the ATO guide on income from two payers.


These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.