Ask LH: Is SAAS Immediately Tax Deductible?

Dear Lifehacker, How are software-as-a-service (SAAS) offerings like Adobe Creative Cloud or Dropbox supposed to be deducted, according to the Australian Taxation Office? Can you apply depreciation to cloud services? Thanks, Sassy Spender

Dear SS,

To the best of my knowledge, commercial SAAS products fall under the same assets category as other computer software/applications. These expenses can be claimed at tax time, provided they were used for business purposes. As with any deductions, if the product was purchased for both business and private use, you can only claim the business portion which involves working out the relevant percentage.

Cloud services are generally deducted immediately as an operating expense, since they don’t involve acquiring any capital assets. (Capital assets have a limited life expectancy and can reasonably be expected to depreciate over the time you use them.) If you use them in the everyday running of your business, you simply claim the full expense in the relevant tax year; which in this case would be ongoing.

As always, you should check with your own financial advisor for advice that is specific to your business. You can also find more information about claiming business deductions at the ATO’s website.


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