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Objective: We set out to estimate healthcare costs of diabetes complications in the year of first occurrence and the second year, and to quantify the incremental costs of diabetes versus non-diabetes related to each complication. Methods: In this cohort study, people with diabetes (n = 45 378) and their age/sex propensity score matched controls (n = 90 756) were identified from a linked dataset in Tasmania, Australia between 2004 and 2017. Direct costs (including hospital, emergency room visits and pathology costs) were calculated from the healthcare system perspective and expressed in 2020 Australian dollars. The average-per-patient costs and the incremental costs in people with diabetes were calculated for each complication. Results: First-year costs when the complications occurred were: dialysis $78 152 (95% CI 71 095, 85 858), lower extremity amputations $63 575 (58 290, 68 688), kidney transplant $48 487 (33 862, 68 283), non-fatal myocardial infarction $30 827 (29 558, 32 197), foot ulcer/gangrene $29 803 (27 183, 32 675), ischaemic heart disease $29 160 (26 962, 31 457), non-fatal stroke $27 782 (26 285, 29 354), heart failure $27 379 (25 968, 28 966), kidney failure $24 904 (19 799, 32 557), angina pectoris $18 430 (17 147, 19 791), neuropathy $15 637 (14 265, 17 108), nephropathy $15 133 (12 285, 18 595), retinopathy $14 775 (11 798, 19 199), transient ischaemic attack $13 905 (12 529, 15 536), vitreous hemorrhage $13 405 (10 241, 17 321), and blindness/low vision $12 941 (8164, 19 080). The second-year costs ranged from 16% (ischaemic heart disease) to 74% (dialysis) of first-year costs. Complication costs were 109–275% higher than in people without diabetes. Conclusions: Diabetes complications are costly, and the costs are higher in people with diabetes than without diabetes. Our results can be used to populate diabetes simulation models and will support policy analyses to reduce the burden of diabetes. What is known about the topic? Most of the costs related to diabetes are due to management of complications. What does this paper add? Diabetes complication treatment required substantial healthcare resources, even after the first year of occurrence. Costs of treating complications are higher for people with diabetes versus those without. What are the implications for practitioners? Complications identified as key drivers should be preferentially targeted to reduce diabetes burden. Our results can be used as input for economic models to simulate the costs associated with the progression of diabetes and to assess the cost-effectiveness of interventions that reduce complications. [ABSTRACT FROM AUTHOR]