Units of in-house software
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
End of attention
Expenditure incurred in acquiring in-house software will form part of the cost of the unit of in-house software acquired. It cannot be allocated to a software development pool.
Expenditure incurred on developing in-house software yourself (or having another entity develop it) may need to be allocated to a software development pool. If the expenditure cannot be allocated to a software development pool, it can be capitalised into the cost of a resulting unit of in-house software.
The general rules for depreciating assets apply to these units of in-house software. The decline in value is worked out using an effective life of 2 years and the prime cost method.
You can claim an immediate deduction for expenditure on in-house software (not allocated to a software development pool) in one instance. This happens if, despite the fact that you incurred the expenditure with the intention of using the software for a taxable purpose, you have not used it or installed it ready for use and decide that you will never use it or install it ready for use.
The termination value of a unit of in-house software you still hold but stop using and expect never to use again or decide never to use is zero.
Last modified: 01 Jun 2005QC 27399