Money & tax

The complete guide to side hustle tax in Australia

Short answer: side hustle income is taxed at your marginal rate, stacked on top of whatever you already earn — from the first dollar, with no separate tax-free threshold for it. That surprises a lot of people, because it feels like a “second, smaller” income that should be taxed lightly. It isn’t. The good news is that once you understand how the stacking works, the numbers are completely predictable, and there’s nothing to fear from tax time if you’ve set money aside as you went.

Why side hustle income doesn’t get its own tax-free threshold

Australia’s income tax is worked out on your total taxable income for the financial year — salary, side hustle profit, investment income, all of it added together, then taxed through one set of brackets. The $18,200 tax-free threshold is a feature of the individual, not of each income source separately.

In practice, this means: if your main job already uses up your tax-free threshold and pushes you into the 30% bracket, every dollar of side hustle profit is taxed starting at 30% (or higher, if it’s enough to tip you into the next bracket) — not at 0% or 15% as if it were a fresh, separate income.

The stacking method

The clearest way to see the real cost of your side hustle is what we call the stacking method:

1. Calculate the tax on your salary alone.
2. Calculate the tax on your salary plus side hustle profit combined.
3. The difference between the two is the actual tax cost of the side hustle.

This is more accurate than applying a flat “my tax bracket is X%” estimate, because it correctly captures cases where the side hustle profit itself straddles a bracket boundary — partly taxed at one rate, partly at the next. Our tax calculator does exactly this calculation for you, using your actual numbers.

The FY2026–27 tax brackets

These are the resident individual tax brackets side hustle income is added into:

Because the system is marginal, only the income within each band is taxed at that band’s rate — not your whole income at the top rate you reach. But if your side hustle profit is the part of your income sitting in a higher band, that profit itself is genuinely taxed at that higher rate, which is why the stacking method matters more than a single “my bracket” percentage.

The Medicare levy

On top of income tax, most people pay a 2% Medicare levy on their taxable income, calculated on your combined salary-plus-side-hustle total. There’s a reduction for low-income earners (no levy below roughly $28,011 for singles in FY2026–27, with a phase-in range above that), but once you’re above the phase-in range, the full 2% applies to your whole taxable income — including the side hustle portion.

There’s a separate, different charge called the Medicare Levy Surcharge, which applies to higher earners without private hospital cover — it’s a different mechanism from the standard levy and depends on your income tier and insurance status.

HELP/HECS repayments

If you have a HELP (formerly HECS) debt, your compulsory repayment is calculated on your total repayment income for the year — again, salary plus side hustle profit combined, not the side hustle in isolation. Repayments kick in once your total income crosses the minimum repayment threshold, and the marginal repayment rate increases in bands as your income rises.

This catches people out in a specific way: side hustle profit can push your total income over a repayment threshold you’d sit comfortably under on salary alone, meaning you start repaying HELP debt — or start repaying it at a higher rate — because of the side hustle, even though the side hustle itself is a small part of your total income. The tax calculator flags this for you if it applies.

How much to set aside

There’s no single correct percentage — it depends on your combined income — but as a starting point:

These are starting points, not precise figures — run your actual numbers through the tax calculator rather than relying on a rule of thumb, especially if your side hustle profit is large enough to push you across a bracket or repayment threshold.

A practical habit: move your set-aside percentage into a separate savings account as soon as you’re paid, rather than at tax time. Treat it as money that was never really yours to spend — it makes tax time a non-event instead of a scramble.

Record keeping and when tax is actually paid

Side hustle income is declared on your normal individual tax return, alongside your salary — there’s no separate side hustle return. Keep records of income received and any expenses you’re claiming as deductions, because you’ll need them to complete your return accurately and to support any deductions if the ATO ever asks.

Depending on how much tax you owe from side hustle income, the ATO may also move you onto PAYG instalments — quarterly prepayments toward your next tax bill, rather than one lump sum at the end of the year. This isn’t a penalty; it’s a smoothing mechanism, and the amount you’ve already set aside covers it either way.

What to do next

Run your actual salary and expected side hustle profit through the tax calculator to see your real numbers — the extra tax, your marginal rate, and a set-aside recommendation specific to your situation. If you’re still working out whether your side hustle needs an ABN in the first place, that’s a separate (and important) question — see Do you need an ABN for a side hustle in Australia?

This article is general information only, not tax, legal or financial advice. It doesn't consider your personal circumstances. For advice on your situation, speak to a registered tax agent or licensed adviser, and always check current requirements with the official source linked above.