The development of an application or app as it is more commonly referred to has created another avenue for individuals to derive income. It seems their is an opportunity for individuals to develop an app for anything, whether it has a specific functional purpose or it is purely for entertainment. By creating an app the developer has the potential to make money from its sale and distribution. When an individual or business develops an app any income derived will have certain taxation implications.
Income Tax
The income received from selling the app via a third party platform, whether it is Apple’s app store, Androids Google play or similar must be included in your assessable income. The agreement between you and the relevant party will determine the amount of assessable income that you are required to include. When an app is made available in a number of countries it is important that you are aware of any taxation consequences in that particular country and any existing tax treaties.
Another means of deriving an income from your app is through the granting or assigning a licence for the copyright to another party. The other party will then distribute the app while compensating the developer through either a lump sum payment or on an ongoing basis or both. Such payments are treated as ordinary income or royalties and are subject to income tax.
Goods and Services Tax (GST)
GST should be considered when you derive income from your app. If your app is available world wide your taxation implications become more troublesome and you will need specialised advice from us.
Deductions
Expenses related to the development of your app may be deductible. Including costs such as:
- Distribution fees (fees withheld by App store or similar)
- Costs paid for someone to develop your idea into an app
- The depreciation of intellectual property
If you have developed an app and received income as a result and are unsure of your tax consequences please do not hesitate to contact one of our tax accountants or tax lawyers here at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today
