Expenditure on a commercial website

February 2017 

Building a new website for your business? Here's what is and isn't deductible for your business.

In an increasingly online business world, the ATO has finally released a new ruling that clarifies how website expenditure should be treated. 

As an intangible business asset comprised of software and content available via the internet, it is considered to have no separate identity or value. The ruling considers whether the various expenses incurred in website development should be revenue or capital in nature. 

Build vs maintenance

Expenditure incurred in developing a website is a capital expense, while expenditure in maintaining the website is of a revenue nature. The costs of modifying a website can be capital or revenue in nature, depending on the facts for each case. 

The more the modification relates to improving the profit yielding structure of the business, the more likely the expense will be capital in nature.

Depreciating the cost

Costs incurred in creating or modifying a website can be deducted over five years from the time it is used or installed as ready-to-use under depreciation rules if it is classified as in-house software.

Alternatively, the expenditure may be allocated to a software development pool or (if applicable) dealt with under the small business simplified depreciation rules (including the instant asset write-off provisions).

Any expenditure that is capital in nature but does not form part of the cost of in-house software will form part of the cost base of a CGT asset. This means that deductions will not generally be available under the blackhole expenditure provisions in section 40-880.

Contact our team for more information about tax-deductible and depreciation costs for your business digital assets on 02 9957 4033.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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