Most businesses have a website.   Consumers are turning to online sources for shopping as well as research, especially prices, and it's now a big part of the process of doing business.   It's important to not only get the online strategy right, but also understand the tax issues.

Building or improving a website costs money, but there are rules regarding tax deductibility.   The ATO has recently released guidance on claiming for website costs, an indicator that this is a concern for the ATO.

If costs were incurred on building a website before business activities commence, the cost is on capital and claimed equally over five years, commencing in the year business commences.

A small business, defined as where turnover is less than $2million, can choose the simplified depreciation rules.   If the cost is:

- below t he instant write-off threshold of $20,000 excluding GST, the full amount can be claimed in the year in which it is incurred;

- above that, it can be added to the general depreciation pool and claimed over three years.

The cost of commercial off-the-shelf software is generally deductible in the year of purchase.   However, if the business is developing in-house software, the cost is deductible over five years (nil in year one, 30% each year from two to four, and 10% in year five).

Other costs, such as for running or maintaining the website, are likely to be deductible outright.   This includes domain name registration fees and annual service fees.

There are traps to be aware of when claiming tax deductions for website costs.   The ATO is developing a public ruling on it, no doubt clarifying the timing for outright deductibility once the instant write-off expires on 30 June 2017.