Hi @HN,
Welcome to the Community! It's a little tricky to answer your question - we don't know how much tax you've already had withheld or how much you'll tax you'll need to pay throughout the year.
You're right - sometimes the tax free threshold can lead to a tax bill when you change jobs. Your new employer doesn't know how much tax has already been withheld for you, so they can't make sure you won't get a bill - and in some cases, your old boss doesn't even have to tell us how much tax has been paid until the end of the financial year.
Let's use some simplified examples to show what can happen when you move from one job to another. In these examples, we'll assume you don't have any tax deductions so we can keep it simple.
- In scenario A, you switch from one job where you earn $56,316 a year to a new job where you earn $60,320. Your former employer withheld $422 a fortnight (based on $2166/fortnight) for 12 weeks; your new employer withholds $476 a fortnight (based on $2320/fortnight) for the rest of the year. When we calculate your tax, we’ll look at how much tax you should pay on your assessable income. Based on the individual income tax rates, we’ll work out your tax as follows:
Assessable income - lower end of tax bracket x tax rate + base tax + Medicare levy = tax payable
59396 - 37000 x 0.325 + 3572 + 1187.92 = 12038.62
Your employers should have withheld the following:
Tax withheld job 1 + tax withheld job 2 = total tax withheld
(422 x 6) + (476 x 20) = 2532+ 9520 = 12052
Balancing accounts:
Tax withheld – tax payable = Debit or Credit
$12052.00 – $12038.62 = $13.38 CR (tax refund)
As you can see, there is only a slight refund available due to the difference in income. This refund can be larger or smaller depending on your income, and can be particularly important when you’re close to an income tax bracket.
Let’s change the situation a little and assume you have a higher education loan account (HECS or HELP) debt as well:
- In scenario B, you switch from one job where you earn $56,316 a year to a new job where you earn $60,320. Your former employer withheld $466 a fortnight ($422 tax + $44 HELP repayments based on $2166/fortnight) for 12 weeks; your new employer withholds $568 a fortnight ($476 tax + $92 HELP repayments based on $2320/fortnight) for the rest of the year.
Based on the individual income tax rates, we’ll work out your tax as follows:
Assessable income - lower end of tax bracket x tax rate + base tax + Medicare levy + compulsory HELP repayment rate = tax payable
59396 - 37000 x 0.325 + 3572 + 1187.92 + (59396*0.04) = 14414.43
Your employers should have withheld the following:
Tax withheld job 1 + tax withheld job 2 = total tax withheld
(466 x 6) + (568 x 20) = 2796+ 11360 = 14156 withheld
Balancing accounts:
Tax withheld – tax payable = Debit or Credit
$14156.00 – $14414.43 = $258.43 DR (tax bill)
If you want to, you can choose to claim the tax free threshold from your new employer. You'll need to give your employer or payroll a withholding declaration to let them know to change how much they withhold.
You can also choose to ask your employer to withhold a little extra from each pay to help reduce the likelihood of getting a bill. This is known as an upwards variation - and you only need to provide written advice explaining how much extra you'd like withheld per pay period (either in dollar amount or as a percentage).
Hope that helps!
