Claiming website costs

If you incur expenses creating or maintaining a website for your business, you may be able to claim the costs as a deduction.

If you're a small business with an aggregated turnover of less than $2 million, you can choose to use the simplified depreciation rules. If you do this and your cost is:

  • less than the instant asset write-off threshold – you can claim a deduction for the full amount in the income year you incur the expense
  • equal to or more than the instant asset write-off threshold – you allocate the cost to a general small business pool.

You cannot use the simplified depreciation rules if you’ve chosen to allocate expenditure on your software to a software development pool.

If the simplified depreciation rules do not apply, website costs have an effective life of five years if you incur them on or after 1 July 2015. In this case, if your expense is:

  • for in-house software – use the prime cost method to deduct the cost each year
  • included in a software development pool – deduct the different proportions of the expense each year.

Ongoing running and maintenance costs

You can also claim an outright deduction for some ongoing expenses associated with running and maintaining your website in the income year the expense is incurred. Some examples include domain name registration fees and server hosting costs.

Example 1: Simplified depreciation rules

In July 2015 your small business bought a $2,000 website hosting package. You also have to pay service fees of $50 a month, plus $50 a year for the domain name. You can claim a deduction of $2,000 in your 2015–16 tax return under the simplified depreciation rules, and a deduction for the monthly and yearly fees in the year you incur those expenses.

Example 2: Software development pool

You set up a software development pool in 2012 when you set up your business’ first website. In August 2015, you incurred $4,500 in costs to update the software behind the website. You have to allocate this expenditure to the software development pool and can claim a deduction for it over five years.

End of example

Draft ruling released

On 6 April 2016 Draft ruling TR 2016/D1 Income tax: deductibility of expenditure on a commercial website was released for public comment. Comments are due by 20 May 2016.

Next step:

  • TR 2016/D1 Income tax: deductibility of expenditure on a commercial website

See also:

    Last modified: 03 May 2016QC 47292