Is the cost of your new website deductible?

The cost of developing a new website for your business is not usually tax deductible in full. The costs can be depreciated which generally means you receive the benefit of a tax deduction over a few years, although there are some concessions for small business owners.

If you are a small business (you have a turnover of under two million dollars) you may choose the simplified depreciation rules.
These rules allow you to immediately write of the website development costs incurred during the year, provided the total development costs for the website are less than $20,000 and the website is completed by 30 June 2017.

If your total costs are above $20,000 and you are a small business you may allocate the cost to the small business pool. The small business pool allows you claim the following:
• A 15% deduction for the first year
• A 30% deduction each year after the first year

For larger businesses to whom the simplified deprecation rules do not apply, the cost of the website can be depreciated over 5 years – i.e. 20% per year. For example:

Website development costs of $100,000 are incurred in March 2017 by a large business. The business can claim $20,000 in 2016/2017 and $20,000 in each year after up until 2020/21.

For ongoing expenses such as domain name registration fees, hosting fees, maintenance and minor enhancements you are able to claim a full deduction for these when incurred.

Pro tip:
Small businesses wanting to take advantage of the $20,000 immediate write off must have their websites completed and ready for use by 30 June 2017. After this date the immediate write threshold will reduce to $1,000.

Author: Lachlan Hunn
Email: Lachlan@faj.com.au