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Under the Fair Work Act, an employer can only deduct money from an employee's wages in very narrow circumstances: the deduction must be authorised by the employee in writing, must be principally for the employee's benefit, or must be required by law (such as PAYG tax).
Working holiday makers in hospitality, retail, and farm work are routinely subjected to these illegal deductions, often because employers know the workers will not push back or report them.
What deductions are actually legal?
The legal deductions an employer can take from your wages are:
- PAYG tax: required by law, calculated according to your TFN status and visa
- Superannuation salary sacrifice: only if you have signed up specifically for it
- Court orders: child support, garnishee orders
- Union dues: if you have signed up specifically
- Employee-authorised payments: things you have asked the employer to pay on your behalf in writing, such as a gym membership
These are the only categories. Anything else taken from your wages without your specific written authorisation is unlawful.
What are the common illegal deductions?
The most common illegal deductions targeting working holiday makers are:
- Uniform purchase: the employer charges you for a uniform that is required for the job (legal position: the cost is the employer's, not yours)
- Laundry charge: a weekly or per-shift deduction for "laundering" your uniform
- Breakages: the cost of broken glasses, plates, or other items deducted from your wages
- Till shortages: cash register discrepancies deducted from staff wages collectively
- Customer walk-outs: deductions when customers leave without paying
- Training fees: a deduction or "bond" for time spent learning the job
- Equipment: deductions for tools, knives, or other equipment "loaned" to the worker
- Notice not given: deductions of unpaid wages because the worker did not give two weeks notice
Even if a contract or employee handbook lists these as deductions, the Fair Work Act overrides the contract. A clause in a contract authorising an illegal deduction is unenforceable.
What is the test for whether a deduction is legal?
The Fair Work Act requires that a deduction be:
- Authorised in writing by the employee, with the authorisation specifying the amount and the purpose, AND
- Principally for the employee's benefit
The second test is critical. Even with written authorisation, a deduction that benefits the employer rather than the employee is not lawful. A laundry deduction benefits the employer (clean uniforms in a controlled state); it does not benefit the employee. A till shortage deduction benefits the employer; it does not benefit the employee.
The only deductions that pass the "principally for the employee's benefit" test are things like a salary sacrifice into super, a gym membership the employee chose, or a savings plan the employee asked to be set up.
What about uniform "deposits" or "bonds"?
Some employers charge a uniform "deposit" or "bond" that is refundable when the uniform is returned. This is sometimes structured as a deduction from the first paycheck. The legal position is:
- The deposit is still a deduction from wages
- It must be authorised in writing
- It must pass the "benefit" test (which it typically does not)
- Even if otherwise lawful, the bond must be returned in full when the uniform is returned
Most uniform deposit schemes are unlawful, and the wages can be recovered.
How do you recover illegal deductions?
The process is:
- Calculate the total amount deducted across all pay periods
- Request repayment in writing from the employer with a breakdown of the deductions
- Lodge a complaint with the Fair Work Ombudsman if the employer refuses
- Provide payslips and bank records as evidence
The Fair Work Ombudsman can recover the wages directly and pursue penalties against the employer. The process is free and the worker does not need a lawyer.
Why this matters for tax
Illegal deductions reduce the gross wages reported on your payslip, which:
- Reduces the income reported to the ATO and the tax withheld
- Reduces the super contributions paid by the employer
- Creates a mismatch between what the employer paid in cash and what was reported
When you lodge your tax return through our service, we cross-check the wages reported to the ATO against your payslips to identify any pattern of under-reporting. Where deductions have been illegally taken, the recovery is pursued through Fair Work and the corrected wages feed into the tax assessment.
How does our service support workers with illegal deductions?
When you lodge through our team, we:
- Review payslips for any deductions that appear unlawful
- Calculate the wages that should have been paid against what was actually paid
- Identify unpaid super connected to underpaid wages
- Refer Fair Work claims for the wage recovery (we do not lodge Fair Work claims directly, but we coordinate with the wage recovery)
- Lodge the tax return and DASP correctly based on the wages actually owed
Get in touch with our team if you suspect your employer has been deducting amounts from your wages that should not have been taken.