Designing, creating and maintaining a website for your business can be complicated. Using the right people, though, can be one of the best decisions you can make.
This is why many of today’s small businesses employ the services of a web developer and designer to take care of getting a website up and running since they don’t have time or expertise to be able to do it themselves.
Often, this can be an expensive venture. But luckily, small businesses can claim deductions for website development costs.
Expenditure in relation to commercial websites is commonly for:
- labour – including contractor expenses and employee expenses
- off-the-shelf software products, or
- registration, licensing and other periodic usage fees.
These expenses can be incurred at any stage of the lifecycle of a commercial website.
The purpose and significance of the website modification and the associated expenditure is to be judged from a practical and business perspective. Factors to be taken into account in determining the character of expenditure incurred in modifying a website include:
- the role of the website in the business
- the nature of the modification to the website and its significance to the business
- the size and extent of the modification
- the degree of planning and level of resources employed in effecting the modification
- the level of approval required for the modification, and
- the expected useful life of the modification.
Capital expenditure is incurred in acquiring or developing a commercial website for a new or existing business. The expenditure is treated as expenditure on ‘in-house software’ if:
- the expenditure relates directly to the commercial website
- the commercial website is mainly used by the business for interaction with customers (that is, any copyright in the website is not itself exploited for profit), and
the expenditure is not deductible under a provision outside Divisions 40 (capital allowances) and 328 (small business concessions).
Business owners can also claim an outright deduction for specific running and maintenance costs, such as server hosting fees, domain name and registration fees in the same income year the expenses are incurred.
You can depreciate the expenses of a website over time. If you have chosen to allocate expenditure on your website to a software development pool, the expenses will have an effective life of 5 years (if you incur them on or after 1 July 2015).
You can also claim a deduction for some ongoing expenses associated with running and maintaining your website in the year they occur.
Examples may include domain name registration fees and server hosting expenses.
If you need help with correctly claiming a website on your tax return as a business expense, why not speak with your tax agent? We’re always willing and ready to help.