Your business can claim website development and maintenance costs under various tax rules.
As a business owner you probably know by now that you need a website; whether to display your credibility, ensure you are accessible, target a wider audience, showcase your work or transact with your customers. Since most consumers now search online before making a purchase decision, a professional-looking site is important.
But creating and maintaining a website can be expensive, and lots of businesses pay to have their sites run because they don’t have the time or expertise to do it themselves.
Thankfully, it is possible to claim a tax deduction for your website costs, however there are various rules to consider.
If you incur the expense before you actually start running your business, you can claim the cost over five years (20% of the cost per year) once you start up.
Simplified depreciation rules
If you have already started up and you are a small business entity (i.e. your “aggregated turnover” is less than $2 million), you can use the simplified depreciation rules. That means:
- If the cost is less than the instant asset write-off threshold of $20,000, you can claim a deduction for the full expense amount in the income year you incur the expense.
- If the cost is equal to or more than the instant asset write-off threshold, you allocate it to a general small business pool.
You cannot use the simplified depreciation rules if you have previously chosen to claim deductions for in-house software under the software development pool rules (more below). In that case the costs need to continue to be allocated to a software development pool.
Software development pool
If the simplified depreciation rules do not apply (in particular if you are not a “small business entity”), you can claim a deduction over five years for website costs incurred from 1 July 2015 under the software development pool rules. Basically, the rules work like this:
- For in-house software, you deduct 20% of the cost per year.
- If the software is included in a software development pool, you deduct different proportions of the expense each year.
- You don’t get a deduction in the income year in which you incur the expenditure in a software development pool. Deductions are at the rate of 40% in each of the next two years and 20% in the year after that.
- In-house software costs can only be added to the software development pool if they were incurred to develop software, not to buy software “off the shelf”.
Running costs and maintenance
You can also claim an outright deduction for certain ongoing running and maintenance costs, like domain name registration fees and server hosting costs, in the same income year the expenses are incurred.