ATO backflips on treatment of Web development costs

The Australian Taxation Office has reversed a proposal made last year to tighten the definition of tax-deductible software in relation to commercial Web site development.

On Wednesday, the ATO changed a draft ruling (DR 2000/6) it made in May 2000 to change the definition of ‘software', after the IT industry said it was "technically inaccurate", according to taxation specialist Deloitte Touche Tohmatsu. Some expenditure on commercial Web site development will now be deductible in the year the expense was incurred, as opposed to a write-off over a two-and-a-half-year period.

According to Deloitte Touche Tohmatsu's tax partner for technology, Stuart Osborne, the proposed ruling would have restricted certain businesses from eligibility to claim tax deductions on software used in the commercial Web site development process, which the ATO said involves any outlay made on designing, planning, testing, uploading of content or loading a site onto a server.

Under the Tax Office's new ruling (TR 2001/D6), software used to create ‘simple' Web sites is not a tax-deductible expense. Simple Web sites involve expenditure on documents that have been converted to HTML format or marked up with simple links, according to the ATO. Any spend on simple Web sites like these could be considered for full deductibility in the year the business incurred the cost.

Osborne told Computerworld that various IT industry bodies and Web development companies managed to reverse the ATO's draft ruling as they were opposed to the idea of determining what client work was or was not tax-deductible.

While Osborne believes the majority of companies will be happy with the outcome, he said there was a catch for startup companies in certain circumstances. For instance, "startups would not be eligible for tax relief when it came to Web site costs associated with new ventures of a capital nature", Osborne said.

Businesses that use software to build business-to-consumer or business-to-business e-tailing or e-procurement sites are only eligible for tax deductions over a two-and-a-half-year period, according to Osborne.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Helen Han

Computerworld
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?