The government appreciates website depreciation right now.
If you have been putting off building or updating your website, now is the time to act! The government is offering tax incentives for small to medium sized businesses to digitise – and you could benefit.
Technology Investment Boost
The government has unveiled a $1 billion Technology Investment Boost in their Federal Budget. The purpose of this investment is to reduce the cost for businesses to adopt digital technology. The boost began on March 29, 2022, and will apply to all eligible deduction requests until June 30, 2023.
While the boost continues into 2023, it is strongly encouraged that you spend on website development now to receive a quick return for the upcoming end of financial year.
As of 2023, the boost is still available with the same criteria. The only difference is you can now claim the entire 120% deduction in your tax return, rather than waiting until the next one to claim the additional 20%.
Am I Eligible?
If your business has an annual turnover of less than $50 million, you can claim an additional 20% tax deduction for the cost of digital depreciating assets and expenses. This means a $100 spend will equate to a $120 deduction! You can also instantly write-off the cost of new website builds or modifications.
The government is willing to apply the boost up to $100,000 of annual expenditure per business. This means you can be ambitious with a potential website build without fear of reaching the limit. Build yourself a fancy new site and save on tax while you do it.
What’s the Difference Between a Capital and Revenue Expense?
If you don’t have a website and you want to build one, that is a capital expense. If you do have one and want to fix it, that is a revenue expense. The Australian Tax Office (ATO) treats these expenses differently, and it’s important to understand the difference.
There is also a third grey area – website modification – that is especially important right now.
A capital expense is a long term asset, like a house or factory equipment. While it may seem less tangible than those physical assets, a website is just as crucial to the function of a business, and could last just as long. Because capital expenses are long-term investments, they are deducted over time as depreciating assets, rather than as one-off expenditures.
A revenue expense is a smaller spend, usually to maintain or repair an already purchased capital asset. For a website, this may include improving loading speeds and optimisation, or repairing broken links. A revenue expense is deducted during the current reporting period, not over the life-time of the asset like a capital expense.
Website modification, or website updates, walk the fine line between capital and revenue. The ATO uses profitability to make the distinction.
If a modification improves the profitability of a site, such as by adding new pages or redesigning the style, it counts as a capital expense. If it doesn’t, it can be classified as a revenue expense. With the boost capital and revenue expenses can both be written off instantly, so you can freely update your website and still deduct your expenses.
Now that you know the difference between expense types, you can decide on how you want to take advantage of the investment boost.
Why Now is the Perfect Time to Build or Update Your Website
Whether you’re considering building, updating or repairing a website, it’s time to take the plunge!
Building a Website
Building a website is classed as creating a depreciating asset, and is consequently classified as a capital asset. As a part of the boost, you can write it off immediately. This is the option that will give you the most bang for your buck. Building a website from scratch is the most expensive option, but that also means you are getting the most back through the 20% deductions.
Updating a Website
When updating a website, changes being classed as capital could be an issue for businesses. That’s because they wouldn’t get the benefit of the deductions during that financial period. Now, with the instant write-off scheme, there has never been a better time to add those pages that you’ve been missing.
Repairing a Website
Repairing a website has always been a revenue expense that can be deducted within the incurred period. In the past, people have been reluctant to do extensive repairs in fear of being graded as a capital expense.
Now, you can enjoy the usual deductions for repairing and maintenance, and if your changes get classed as capital, you will get the immediate extra 20% deduction anyway. There is nothing holding you back from optimising your site.
Build Now Before the End of the Financial Year
Your website is vital to the performance of your business. With the internet increasingly becoming the most likely point of contact between you and your customer, your website is how they get an impression of your brand. By taking advantage of the technology boost, you can create a persuasive platform to engage your customers.
At Oddball, we offer website building and development services, as well as hosting and maintenance. Our team of web design experts can create a website that represents your brand and creates sales opportunities.
Get in touch with us and start your web project now to maximise your returns before the end of this financial year.