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Website and software development costs

Discussion in 'Accounting, Tax & Legal' started by connical88, 4th Jun, 2014.

  1. connical88

    connical88 New Member

    4th Jun, 2014

    In my business, I built a website and some underlying software. Customers are subscribing to the website for around $10/month. Some of the cost of the website/software was my salary, some was salary paid to employees, and some was paid to suppliers and contractors who assisted for various modules.

    I am wondering if I should claim a tax deduction for the cost (of the software and website) or whether I should total the costs and claim depreciation.

  2. Terryw

    Terryw Well-Known Member

    9th Jun, 2006
    YOu can't pay yourself, but if a company developed it the company could claim your wages - which are income to you. Employee wages can be claimed.

    Why would you conisder not claiming business expenses?
  3. SME Specialist

    SME Specialist New Member

    5th Aug, 2014
    Melbourne, VIC
    Need details


    First issue f you are trading as a sol trader you can't claim wages paid to you, however if you are trading via a company or trust then you can.

    However the bigger issue is, are the the software and website cost Capital or Deductible?

    In my view if you are using the software to generate business income it should be allocated to a "Software development pool". (Website software also fall under this pool)

    You do not get any deduction for expenditure in a software development pool in the income year in which you incur it. You are allowed deductions at the rate of 40% in each of the next two years and 20% in the year after that.

    For any other costs relating to the website that are not "Software or hardware" see the below

    Preliminary to business

    Costs incurred preliminary to the commencement of business are not deductible prior to commencement. Some website expenditure may fall within this principle. In some cases an amount incurred before commencement of business may be deductible for depreciation of a unit of plant or software used in producing the assessable income after the business has commenced.

    Existing business

    Costs incurred by an existing business when setting up a website that establishes, replaces or significantly extends the 'profit yielding structure' are considered to be of a capital nature. Some kinds of capital expenditure can be deducted under other provisions of the ITAA 1936 or the ITAA 1997

    So basically in my view most of the cost look to be capital and can be written off over various periods.

    Hope this helps

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