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  • Claiming a tax deduction for workers' salaries, wages and super contributions

    As a business owner, you can generally claim a tax deduction for:

    • the salaries and wages you pay to employees
    • super contributions you make on time to a complying super fund or retirement savings account (RSA) for your employees and for certain contractors.

    Salary and wage expenses are a type of operating expense (sometimes called working or revenue expense).

    If you're a sole trader, you can usually claim a deduction for your own super contributions in your personal tax return.

    On this page:

    Salaries and wages

    As the business owner, the deductions you can claim depend on the type of business you operate. If you operate:

    • as a sole trader
      • you are the business owner and not an employee of your business, therefore you can't pay yourself a salary or wage
      • any nominal payment of a salary or wage to you is considered a distribution of profit
    • your business as a partnership
      • the partnership can't pay you salary or wages as you are a partner, not an employee
      • any nominal payment of a salary or wages to a partner is considered a distribution of profit
    • your business as a company or trust, your company or trust can generally claim a deduction for any salaries and wages paid to you or other workers.

    If you engage a contractor to complete a service for your business, you may be able to claim the amount you pay them as a deduction.

    Generally, to be able to claim a deduction for the payments you make to your workers, you must first comply with the pay as you go withholding (PAYGW) and reporting obligations for each payment.

    If your income includes personal services income (PSI), the amount you can claim as a deduction for payments you make to an associate may be limited.

    See also:

    Super contributions for your workers

    You can claim a deduction for super contributions you make on time to a complying super fund or retirement savings account (RSA) for your employees and for certain contractors.

    To work out which contractors this applies to, use How to work it out – employee or contractor.

    The amount you can claim may be limited if your income includes PSI.

    See also:

    Personal super contributions

    As a business owner, we understand how busy you are managing and growing your business as well as meeting your employer obligations.

    Remember to plan for your own future. Super can make a positive difference to your lifestyle in retirement.

    You may be able to claim a deduction (in your personal tax return) for your personal super contributions. You may also be eligible for government super contributions such as the super co-contribution or low-income super tax offset.

    See also:

    Last modified: 19 Jun 2019QC 33728