Trademarks: Are they tax deductible?

Business Development Specialist - Ceebeks Business Solutions for GOOD

Recently we have set out to protect the intellectual property for our business brands which help our business stand out in the marketplace.

Over the 30 years that we have been in business, we have been developing and building our brand image and have applied for and registered business names & logos as trademarks.

But are trademarks (an essential tool for protecting your business) tax deductible?

Unfortunately, the answer is no!

Expenditure relating to the establishment of a trademark should generally be treated as being capital in nature and should not be deductible. … 

… a trademark is a CGT asset and the amount paid for the trademark should be added to the cost base of the asset for CGT purposes

The costs associated with registering a trademark will become a capital cost of starting your business. As a result they can be used as a deduction if you sold your business and they would reduce any capital gain made.

Furthermore, amounts spent by a business on trademarks are not strictly speaking black hole expenses, but they do show how narrow and sometimes illogical income taxation legislation can be. Had you been incurring expenses in registering a patent the costs could be written off as a depreciating asset, but because the section dealing with depreciable assets does not list trademarks no tax deduction is allowed.

Interestingly the cost of developing your website is listed under depreciating assets, and as you will more than likely qualify as a small business entity, you will be able to claim an immediate tax deduction if the total cost was less than $20,000.

Businesses that do not qualify for the simplified depreciation rules, because they are not classed as a small business entity, can write off website costs over a five-year period.

Other expenses that you will possibly be paying in the setup of your business will include fees paid to government agencies and professional fees paid to accountants and lawyers to get advice about setting up your business

The fees paid to government agencies would include:

  • stamp duty paid to a state government for the setup of a family trust,
  • fees paid to ASIC for the setup of the company, and
  • stamp duty paid on assets transferred into an entity that will carry on the business.

If you need further information about protecting your business using trademarks, please reach out to us on 5561 2643.

Business Development Specialist - Ceebeks Business Solutions for GOOD