White SW Computer Law
Intellectual Property, Information Technology & Telecommunications Lawyers
Melbourne Office - PO Box 452, COLLINS STREET WEST Victoria 8007 Australia
Sydney Office - GPO Box 2506, SYDNEY New South Wales 2001 Australia
Telephone: Melbourne Office - +61 3 9629 3709 Sydney Office - +61 2 9233 2600
Facsimile: Melbourne Office - +61 3 9629 3217 Sydney Office - +61 2 9233 3044
Email: wcl@computerlaw.com.au Internet: http://www.computerlaw.com.au

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Are you eligible for a sales tax benefit?

A Tax-advantaged computer program ( “TACP” ) is one that is contained in a carrying medium other than a microchip. The value of the TACP is deducted from the taxable value of the carrying medium before calculating the sales tax due.

The Tax Commissioner has stated that the following storage devices commonly contain TACP's:

  • CD ROM's containing computer programs
  • Floppy and hard disks
  • Magnetic tapes

Where data is used in conjunction with and is integral to the execution of the TACP, the value of the data can be added to the value of the TACP, for example a spell checker program which contains a dictionary which is essential to the operation of the program. It is considered that multi-media software marketed for use with personal computers will be exempt from sales tax except for the value of the carrying medium.

How do you value a computer program? It is not a straight forward task. The onus is on the taxpayer to value the TACP. The Tax Commissioner considers the value of a TACP to be its replacement cost. If you are in doubt of the value of a TACP, you should request a tax ruling. It is risky to use an arbitrary value when there is insufficient data to calculate the value.

When the replacement value is not ascertainable, the tax office does have a guide which is available.

If a number goods are sold in a package the wholesale price used to calculate the value of the TACP is only the value of the goods which contain the TACP.

Programs which are contained in a microchip in a cartridge, for example a computer video game, will be tax advantaged if the cartridge is marketed exclusively for use with:

  • a personal computer
  • a home electronic device that is used with a computer monitor or television screen
  • a personal computer or a similar home electronic device and the program is marketed exclusively for use for educational purposes, entertainment purposes or a combination of both.


www.computerlaw.com.au © White SW Computer Law 1996 This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.

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