As a small business, you can maximise the value of your IT spend by utilising available tax deductions.
Lowering Your Tax Bill
Generally, IT expenses are tax deductible provided you incurred them for business purposes. However, depending on what you bought and how much you spent, you can either claim the expense in full or over a period of time.
Beyond Hardware and Software
These days, IT costs may cover things like computer hardware and software as well as:
- Tablets, smartphones and laptops
- Scanners, printers and photocopiers
- Website running costs
- Home office expenses
Some of these are everyday costs of running a business, while others are asset purchases.
Claiming Over a Number of Years
When you buy something for your business that you use for more than one year, you are likely to have bought a capital asset.
Capital assets are also called depreciating assets because they don’t last forever and their value declines over time. Computers, IT hardware and portable devices fit this description. For these assets, you normally have to claim for the money you spent over a number of years unless they cost less than a prescribed threshold.
$20,000 Instant Write-off
The good news for small businesses is that following the 2015 Budget, this threshold was raised from $1000 to $20,000.
This means you can claim a full tax deduction immediately on most depreciable assets (like IT equipment) bought and installed between 7.30pm (AEST) 12 May 2015 and 30 June 2017, provided they cost less than $20,000 individually. To qualify, your businesses must be actively trading with a turnover of less than $2 million.
Not all assets purchases can be claimed. While off-the-shelf software like QuickBooks Online is eligible, software developed in-house may be excluded.
For assets bought between 1 July 2014 and 12 May 2015, you can claim an immediate deduction if they cost less than $1000 each. Otherwise you add them to a “general small business asset pool” and follow the ATO rules to determine the amount to claim.
As a further concession, until 30 June 2017, you can deduct the balance of this pool if its year-end balance is below $20,000.
Claiming Everyday Costs
Website running costs are deductible in the year you incurred them. However, website set-up costs are deducted over time. If you operate a home-based business, you can claim depreciation on IT equipment, work-related phone calls and internet costs.
Rules around depreciation change regularly, so get some professional advice before making a big purchase!
Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved. You are responsible for consulting with your own professional tax advisors concerning specific tax circumstances for your business. Intuit disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. If you have questions regarding accounting issues specifically related to your industry or your business circumstances, you should consult with your own professional tax advisor, accountant, attorney, industry expert or professional association.