Domains and hosting are treated as capital or depreciable assets by the ATO. Depending on usage, they may attract CGT or be eligible for deductions or depreciation. Proper record-keeping, correct asset classification, and awareness of evolving tax guidance help small businesses ensure compliance and claim the right tax benefits when managing digital assets like websites and hosting.

Building an online presence involves more than choosing a catchy domain name or hosting platform; it also brings tax considerations.

In Australia, the Australian Taxation Office (ATO) treats domains and hosting expenses as digital assets, subject to specific tax rules. Understanding how these assets are handled ensures compliant reporting and maximised claims for your small business or startup.

This blog explores how digital assets like domains and hosting are taxed by the ATO, including CGT, depreciation, and deductions for small businesses.

Why Domains And Hosting Are Taxable

Domains and hosting are capital assets, not everyday consumables. That categorisation affects the way their expenses are treated:

  • CGT Asset: A domain name is considered a CGT asset. The cost of acquiring the right to use it is included in its cost base for future capital gains or losses.
  • Depreciable Asset: Hosting fees and website development expenses may be considered depreciable items under ATO rules.
Read More: Why You Should Buy Web Hosting & Domains Before June 30 for Tax Benefits

Domain Names And CGT Treatment

A domain registered for professional or business use is not a personal or consumable expense; it’s a CGT asset.

How it works:

1. Initial Purchase Cost: The registration fee adds to your cost base.

2. CGT Event Occurs: When you sell the domain or it expires without renewal, a CGT event occurs.

3. Gain or Loss: Compare proceeds (if any) with your cost base to calculate any capital gain or loss.

Many small businesses won’t dispose of domains, but it’s good to know in case of rebranding or sale.

Pro Tip: If rebranding or changing domains, assess if CGT could apply and whether old domains should be written off or retained. 

Understanding Depreciation and Deductions in Hosting And Website Development

Hosting fees and website setup costs are considered either immediately deductible or depreciable assets, depending on the situation:

  • Immediate Deduction: If you’re a small business and hosting/spend falls under temporary full expensing or instant asset write‑off, you can claim the full expense in the year incurred.
  • Depreciable Assets:
    • Website development costs: Included in a software development pool with an effective life of five years
    • Ongoing hosting fees: Deductible in the year they’re incurred
    • Domain renewal fees: Eligible for immediate deduction

Example: If your hosting costs $1,200/year, you deduct $1,200 each financial year. A $5,000 custom website build might be depreciated over five years at $1,000 annually, unless full expensing applies.

Pro Tip: Split your web costs into development (capital/depreciable) and operational (deductible) to avoid misreporting during tax filing.

When Does CGT Apply to Websites?

If you sell your website, including its domain and content, it’s likely to trigger CGT:

  • Determine Cost Base: Include domain purchase, hosting fees, and development costs.
  • Calculate Proceeds: What you receive from selling the website.
  • Calculate Gain or Loss: CGT payable on the net gain after applying any discount (such as the 50% discount for assets held over 12 months).
Read More: How to Prepare Your SME for the End of Financial Year (EOFY)

ATO’s Broader View on Digital Assets

The ATO’s guidance on digital assets is evolving, but currently, it applies existing laws pragmatically:

  • The Board of Taxation (Mar 2025) confirmed that the existing tax framework can cover digital assets if the ATO issues clear guidance.
  • The ATO continues to develop working groups and issue rulings to clarify CGT and depreciation rules for digital assets.

This means you can apply existing rules to domains and hosting, as long as you maintain proper records.

Read More: EOFY is Coming: Save BIG on Your Online Essentials

Tips for Small Businesses & Startups

Keep Detailed Records

Maintain all invoices and receipts for:

Pro Tip: Keep digital copies of all invoices and renewal receipts for domains, hosting, and website development for audits and accurate CGT or deduction claims.

Choose the Right Accounting Treatment

  • Use full expensing or instant asset write‑off when eligible
  • Depreciate long-term website development costs as required
Pro Tip: Take advantage of the instant asset write-off or temporary full expensing for eligible hosting and setup costs.

Prepare for CGT When Selling

If you sell off a domain or a developed website, calculate CGT using the accumulated cost base for compliance.

Monitor ATO Developments

Watch for new rulings or guidance, as the tax treatment of digital assets continues to evolve.

Pro Tip: Subscribe to ATO updates or check regularly for changes in digital asset treatment—new rulings may impact deductions or CGT events.

External Authority Insights

  • ATO source confirming domains as CGT assets and depreciation rules.
  • The Board of Taxation’s March 2025 report affirms that existing laws suffice with clearer guidance.

Conclusion

Understanding your tax obligations around digital assets isn’t optional; it’s essential. Whether it’s a domain name that may attract CGT, hosting costs you’re deducting, or website builds being depreciated, clarity ensures compliance and helps you avoid surprises at tax time.

Unlock hassle‑free tax filing and online readiness. Start your domain and hosting with Crazy Domains today, and get the support you need to thrive online!