Tax experts and software developers are puzzled over the exclusion of software from the Government’s small business tax break, arguing businesses might be misled when buying new hardware.
David Pring, tax partner at Deloitte, says that businesses must keep in mind that when purchasing a new computer, hardware and software are calculated independently.
“Our concern is that so much equipment has a software element that it seems almost an odd scenario. What this will lead to is questions being asked about whether other assets containing software will be affected as well,” he says.
“The people it will hurt the most are people who buy a computer for $1200, but it has $300 worth of software on it – therefore they will not qualify for the break, because the concession is for assets above $1000.”
Pring says the Government’s concern is that businesses would take a copy of the software and put it on a second machine, effectively using two copies of the one asset.
But he says the exclusion of software could hurt businesses that count on the tax breaks, and that even stand-alone software products should be eligible.
“Medical equipment has software that is needed – will that be included? People in their mind say ‘I’m buying a computer’, not ‘I’m buying a computer with extra software’, so that needs to be kept in mind,” he says.
“We think stand-alone software applications should be included as well. I can’t think of a good reason why they shouldn’t; it would seem that any business that’s investing in improving their productive capacity should claim that allowance. All it needs is a small amendment.”
David Hodges, co-founder and managing director of software development firm Smartpath, says that software should “absolutely” be included in the break, especially the asset management software his company provides.
“Software is a depreciated item and is treated as an asset in organisations. The exclusion of that in the tax break is disappointing,” he says.
“Particularly for us, enterprise software is generally purchased outside of a piece of hardware. Ours is a cost-saving piece of software; we would have expected especially products like ours to be included because it can save money.
“Having encouraging organisations to spend capital, I thought that was the whole idea of the tax break.”
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
