Company A is an SBE company which incurred $13K in the redesign and rebuild of the company website.
Is it fully deductible under the General Small Business Pool provision?
TR 2016/3 confirms that expenditure on acquiring or developing a commercial website for a new or
existing business would generally be capital in nature. This means that it is not possible to claim an
immediate deduction for the expenditure under the general deduction provisions in section 8-1 ITAA
However, expenditure on a commercial website will generally form part of the cost of in-house
software which can be deducted under the depreciation rules in Division 40 or the simplified
depreciation rules in Subdivision 328-D.
If the taxpayer is a small business entity (SBE) and is using the simplified depreciation rules then the
ATO confirms that an immediate deduction can be claimed for expenditure if the cost is less than the
relevant asset write-off threshold (which is $20,000 for certain income years such as the 2017 and
2018 income years). Otherwise, the expenditure should be allocated to the client’s general pool.
If the client is not an SBE or is not choosing to use the simplified depreciation rules then the normal
depreciation rules in Division 40 should apply. The two main options are:
Depreciate the software over its effective life. As per section 40-95, this is 5 years if the software is
installed ready for use on or after 1 July 2015. Deductions cannot generally be claimed until the
software starts being used in the business etc.
Allocate the software to a software development tool. If the software is allocated to the pool on or
after 1 July 2015 then it is deducted over 5 years. If being deducted over 5 years the deductions are
claimed as 0% in year 1, 30% in years 2, 3 and 4 and 10% in year 5. Refer to section 40-455.