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43 Total salary and wage expenses

Last updated 11 February 2019

Show at L the total salary, wages and other labour costs actually paid or payable to persons employed in the partnership’s business. However, exclude those costs for private domestic assistance or which form part of capital expenditure, as they are not deductible.

A partner cannot be an employee of a partnership – you cannot claim a deduction for partners’ salaries, nor can partners’ salaries create or increase a partnership loss. In reality, partners’ salaries are an allocation or advancement of profits before general distribution and are not taken into account in calculating the net partnership income or loss – see TR 2005/7 - Income tax: the taxation implications of ‘partnership salary’ agreements.

You can only claim a deduction for a payment made or liability incurred by a partnership to an associated person, principal, agent, related entity or associate entity if it is incurred in producing assessable income and the ATO is satisfied that the amount is reasonable.

These expenses include any salary and wage component shown at E Cost of sales item 5, such as:

  • allowances
  • bonuses
  • casual labour
  • retainers and commissions paid to people who received a retainer
  • workers’ compensation paid through the payroll
  • direct and indirect labour costs
  • directors’ fees
  • holiday pay
  • locums
  • long service leave
  • lump sum payments
  • other employee benefits
  • overtime
  • payments under an incentive or profit-sharing scheme
  • retiring allowances
  • sick pay.

Include here and at item 44 Payments to associated persons any salary or wages paid to an associated person, principal, agent, related entity or associate entity.

However, these expenses do not include:

  • agency fees
  • contract payments
  • sub-contract payments
  • service fees
  • superannuation
  • management fees
  • consultant fees.

Print in the CODE box the code from table 7 that shows where you predominantly reported salary and wage expenses.

Table 7

Salary and wages wholly or predominantly reported in: Code

the expense component of Cost of sales


all other expenses


the expense component of both Cost of sales and All other expenses


neither Cost of sales nor All other expenses