ATO Interpretative Decision
ATO ID 2004/255 (Withdrawn)
Income Tax
Capital Allowances: depreciating asset - in-house softwareFOI status: may be released
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This ATO ID is withdrawn as the issue is now addressed in draft Taxation Ruling TR 2016/D1.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does computer software developed by the taxpayer and embedded into their business website to be used by clients accessing that website to create their own website satisfy the definition of in-house software in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The computer software developed by the taxpayer does not satisfy the definition of in-house software in subsection 995-1(1) of the ITAA 1997.
Facts
In setting up an internet website business, the taxpayer developed computer software which was embedded into the business website they were setting up to be used by clients accessing their website as a tool to create their own website. The taxpayer's income is generated when the computer software on the website is used by clients creating their own website.
Reasons for Decision
Computer software, or a right to use computer software, that you acquire, develop or have another entity develop that is mainly for you to use in performing the functions for which the software was developed is 'in-house software' (subsection 995-1(1) of the ITAA 1997). In-house software is a depreciating asset (paragraph 40-30(2)(d) of the ITAA 1997) in respect of which a deduction for decline in value is available (subsection 40-25(1) of the ITAA 1997).
The function of the computer software developed by the taxpayer is to create websites but the taxpayer did not use the computer software to create a website. Rather, they developed the computer software and embedded it into their website for use by other entities to create their website. Accordingly, the computer software does not satisfy the definition of in-house software in subsection 995-1(1) of the ITAA 1997.
Date of decision: 26 November 2003Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
subsection 40-25(1)
paragraph 40-30(2)(d)
subsection 995-1(1)
ATO ID 2004/256
Keywords
Capital Allowances CoE
Computer software
Depreciating assets
In-house software
Uniform capital allowance system
ISSN: 1445-2782
| Date: | Version: | |
| 26 November 2003 | Original statement | |
| You are here | 22 April 2016 | Archived |