Who can claim
This deduction is available to individuals and companies.
- The expense is incurred in carrying on an existing income-producing business.
- Any private, capital or non-income-producing component is reasonably apportioned or excluded.
- The payroll tax or workers compensation premium relates to employees or other covered workers whose services are used to earn assessable business income.
What you cannot claim
- Do not include private drawings or personal expenses.
- Do not treat a capital asset, improvement or acquisition cost as an ordinary operating expense.
- Exclude private, exempt-income and non-assessable-income portions.
- Relief that prevents or reduces the liability also reduces the expense incurred. A later refund, reimbursement or recoupment of a deductible amount is generally assessable income under Subdivision 20-A rather than simply netted from the deduction, subject to the relief measure's own law.
- Fines, penalties and interest are not payroll tax or workers compensation premiums and require separate treatment.
How the amount is worked out
Claim the deductible employment-related payroll tax and workers compensation premium incurred under the applicable timing rule, apportioned where necessary. Reduce the claim for relief that reduces the liability itself. Record a later deductible-expense refund or recoupment separately as assessable income under Subdivision 20-A unless the relief measure provides different treatment.
Records the ATO expects
- Payroll-tax assessment and payment
- Workers compensation policy and premium
- Worker and wage records
- Relief, refund or recoupment statement
Where this rule comes from
Primary source: Income Tax Assessment Act 1997 section 8-1 (Section 8-1). Reviewed 30 July 2026. Covers the 2025-26 and 2026-27 income years.
Supporting sources:
- Income Tax Assessment Act 1997 Subdivision 20-A (Compilation 266 in force 1 July 2026)
- ATO business income and deductions (Updated 1 June 2023)