A client has recently purchased a new business. Should the preliminary expenses incurred such as legal fees, site valuation, stocktaking fees, web/domain and business registration fees be expensed in the P&L or should I capitalise those items in the balance sheet because they relate to setting up a new business?

Thanks,

Hi Sarah
You can create an account on the balance sheet called Business Start Up Costs and capitalise them. When the accountant does the year end, he/she would go through each item and be able to treat them appropriately and reclassify them as necessary.

Most Small Business Entities will be entitled to an immediate writeoff for startup costs. So for ACCOUNTING purposes the costs are "capital" in nature and hence not deductible, for TAX purposes, the costs are written off at a special rate of 100%.
the inconsistency between accounting and tax rules can be a minefield. If you need further information try this link:

https://www.ato.gov.au/individuals/tax-return/2017/in-detail/publications/guide-to-depreciating-assets-2017/?page=19#Certain_start_up_expenses_immediately_deductible

cheers
BC