Could your website be tax deductible?

Designing, developing and maintaining a website is an unavoidable business cost. As a business owner or if you run a commercial website of any kind, you’re probably wondering whether these costs are tax deductible.

Is the website expense revenue or captial?

Website expenses that are revenue in nature are typically non-deductible, while capital expenses may be tax-deductible. So, how can you determine whether your website expense is capital or revenue in nature?

So how do you identify if your website expense is capital or revenue?

The ATO recently announced new tax rules regarding commercial website expenses, and there is a lot to consider when determining if your website costs are tax-deductible. In short, it all comes down to one fundamental question about if the expense was capital or revenue.

Captial

“A capital expenditure is assumed to be consumed over the useful life of the related fixed asset.”

Example: You have paid for a new functionality or upgrade to your website, which in turn assists with sales and profits.

Revenue

“A revenue expenditure is assumed to be consumed within a very short period of time.”

Example: Your business sets up a short-term landing page for a special promotion that is running for one month.

Common website costs:

  • Web hosting
  • Licensing fees
  • Maintenance and updates of software
  • Website modifications ?
  • Content migration
  • Social media
  • Domain names
  • Design and Programming costs.

We know what you’re thinking – the costs incurred for my website could be either revenue or capital in nature. Exactly!

It ultimately depends on the reason for the investment cost.

Generally, the ATO considers commercial websites to be capital gains assets (CGT), which means the related expenses are non-deductible. However, if you can prove that your website’s expense was revenue in nature, it could be tax deductible.

Are you following so far? Well, here’s another twist.

There is a catch! And it’s a beneficial one. The ATO allows for immediate deductions on developing or acquiring a website in certain situations, even if the expense is capital in nature. Your expenditure could still be tax deductible if it funds an intangible depreciating asset, allowing you to claim depreciation deductions for the expense.

As you can see, the tax treatment of commercial websites is quite complex. Therefore, we HIGHLY recommend consulting your accountant to discuss your specific circumstances and ensure you maximize your tax return while remaining compliant.

Call Now Button