In an effort to offset the negative impact of the pandemic, the Australian Taxation Office (ATO) introduced the tax depreciation incentives in March 2020. This increased the threshold from $30,000 to $150,000 for the instant write-off for new and second-hand assets.

As the end of the financial year nears, you may be looking at ways to claim tax deductions and other tax benefits. This is terrific news for Australian businesses that had to temporarily close their doors earlier this year due to surging Omicron cases.

However, as more businesses transitioned online, the question lies in whether the incentive includes website-related assets. Does it?

The answer is Yes!

Your website costs are tax deductible. This is specifically stated in Taxation Ruling 2016/3. The ruling points to “the deductibility incurred in acquiring, developing, and maintaining or modifying your website on a business.”

To determine what you can claim as an immediate deduction versus what you need to depreciate over time, you need to identify each expenditure category of your expenses. There are two:

  • Revenue expense: Revenue expenses relate to the operational and usage costs of your website. This includes regular maintenance, monthly hosting, and recurring domain registration fees. These expenditures are immediately deductible.
  • Capital expense: This often relates to the acquisition and initial development of the website. This also includes modification costs to significantly enhance or change your website. Capital expenses are either non-deductible or deductible over a number of years.

READ: The Ultimate Guide to Small Business Tax Offset in Australia: What Is It and How It Works

Types of Commercial Website Expenditures

To better understand which costs constitute revenue or capital expenditure, here are the different types of commercial website expenses and which category each item belongs to:

TYPE OF COSTS REVENUE EXPENDITURE CAPITAL EXPENDITURE
Labour Labour costs pertaining to running a website (e.g., uptime monitoring, security check, database optimisation) Labours costs on enhancing a business’ profit-yielding structure
Off-the-shelf software and usage fees
  • Periodic software license
  • Periodic payment of commercial website leased from a web developer (provided that the business owner doesn’t have the right to own the website)
  • Monthly hosting, registration, and licensing fees
 Off-the-shelf software costs that enhance a business’ profit-yielding structure
Website development or acquisition  Temporary microsites for short-term marketing purposes Costs in developing or acquiring a website or a microsite either for new or existing business are generally capital expenses
Website maintenance/modification
  • Routine website maintenance costs
  • Routine or piecemeal modifications
  • Modifications that add minor functionality or enhancements
  • Regular upgrades on existing website software so it’s compatible with new browsers, operating systems, and devices
  • Modifications that add new functionality or materially expand existing functionality
  • Costs to replace a website’s material part
  • Modifications on a work program resulting in significant website upgrades or improvement
Content migration Costs of migrating content to a new platform as part of a website upgrade (as long as the upgrade doesn’t significantly modify or replace the website) Costs of migrating content from an old website to a new website
Social media Costs to maintain a social media profile Costs to establish a social media presence

For an extensive look at the deductibility expenditure of commercial websites, head to ATO’s Taxation Ruling 2016/3. Sample scenarios are provided to help you identify how different expenditure deductions apply.

What Website Solutions Are Tax Deductible?

Domain

Monthly or annual domain fees are recurring expenses that fall under revenue expenses. These costs are immediately deductible, along with the initial domain registration costs.

Web hosting

A reliable web hosting ensures speedy and efficient website performance. Depending on your hosting plan, this can mean a significant amount on your financial statement. Good thing this falls under revenue costs and is tax deductible.

CD Web Hosting

Online marketing solutions

While it’s not included in the discussed tax ruling, online marketing solutions are filed under your marketing budget. This includes a subscription to email marketing platforms, running paid ads on social media, and investing in SEO.

Invest in Your Website Today

If you’re running a website, you’re looking at a lowered tax income return bill this end of the financial year tax filing. Leverage this as an opportunity to bolster your online presence. Employ website solutions that can help increase your leads, increase your traffic, boost your sales, and claim an overall win online.