Can I deduct the cost of a website?

Can I deduct the cost of a website?  This has always been a good question but an even better one now that the ATO have re-defined their position.

The ATO released TR2016/3 just before Christmas. A TR is a tax ruling which is binding on taxpayers and the ATO.  They are only issued for big ticket items. 

The ATO had previously issued a tax ruling in 2001 but withdrew it in 2009 due to the changing nature of websites.

So what is the ATO’s stance now?

No matter how basic, the costs to acquire or develop a website are deemed to be capital. This means they are progressively depreciated.  However, an immediate deduction can be claimed where the purpose and life of the web page is intended to be short – say like a short term sales campaign.

Initial website expenditure may also be deductible where it is paid for periodically under a licence fee model.

Domain name registration fees and website hosting costs are deductible when expended.

So what about maintaining a website?

Such costs would generally be deductible provided they aren’t in respect of significant modification. The ATO states that significant modification would not include:-

• Persevering the website.
• Doesn’t alter the functionality of the website.
• Doesn’t improve the efficiency of the website.
• Doesn’t extend the useful life of the website.

One common question is in respect of adding another on-line payment method. This would be considered to not being a significant modification and can therefore be deducted in full.

Social media posts are generally deductible due to their immediate short term nature.

We welcome any question you may have.

At MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.