There is still time before 30 June to complete projects that can set your business up for faster growth in the next financial year. But to get the deduction you will need to get your skates on.
Since July 2015 the tax laws changed regarding small business and the ability to claim instant tax deductions for each capital item purchased up to $20,000. Prior to this most assets were depreciated over 4 or 5 years.
Many small business owners are still confused about what this covers, so below is a summary of the basics. Speak to your accountant of course, but there is still time to upgrade your digital toolset and claim it back in July for a rapid return.
You must be a small business. The definition of this is that you have an aggregated turnover of less than $2 million.
The expenditure has to be of a capital nature and qualify for the simplified depreciation rules. The rulings are referred to in the ATO’s Tax Ruling on “Income Tax:Deductibility of expenditure on a commercial website “(TR 2016/3).
This exciting read outlines the treatment of expenditure on the creation of websites, or if your rebuild it, what sort of major enhancements need to be made to consider you have created an asset that can be instantly written off under the Small Business Instant_Write-Off. Versus being depreciated over 5 years.
What costs might be included?
You can already claim RUNNING COSTS in full. So operating and maintenance costs such as domain name registrations, monthly hosting, ongoing content maintenance and technical maintenance are all deductible in full.
But CAPITAL COSTS can be confusing. To qualify for instant write-off in the year of incurring the expense these costs must be major in their nature. Either a new website with new functionality that was built prior to the business starting, inhouse web development costs and related capital costs such as “off-the-shelf” software.
Be sure to talk to your accountant, especially on software developed in-house. To write it off instantly it has to be complex and add significant improvements. Aspects such as requiring significant planning, custom features, e-commerce, membership or secure access to business documents (i.e an agent’s login).
Don’t sit on your hands if you have a small cash surplus. Confirm with your accountant the eligibility of your project and talk to your web developer to finish projects that you can get an instant depreciation on.
Written by Mark Jones