Capital Allowances

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Capital Allowances are Deductions for Fixed Assets

Capital allowances are deductions you can claim for wear and tear of qualifying fixed assets bought and used in your trade or business.
Qualifying fixed assets include carpets, machinery and office equipment.
For tax purposes, we refer to qualifying fixed assets as "plant and machinery".

Fixed assets "wear and tear" or depreciate over time.
Depreciation accounted for in financial statements is not tax deductible.
Capital allowance is given instead for assets that qualify for plant and machinery. Claiming capital allowance over a period of time is also known as "writing off the asset".
Source : IRAS

Calculating Capital Allowances Source : IRAS website

Businesses can claim capital allowances when the expense has been incurred. 
An expense is incurred when the legal liability to pay has arisen, regardless of the date of actual payment of the money.


Fixed assets can be purchased in cash or hire purchase

At [Fixed Asset] , click [Asset Master]

Click [Add], click here to continue to add a new fixed asset


At the [Capital Allowance] tab, indicate the purchase type as shown below



 If you select [Cash Purchase] , the Hire Purchase field will be disabled


Click here for Hire purchase fixed asset


Low Value Assets

Companies may choose to write off low-value assets in one year provided certain conditions are satisfied. A low-value asset is one that does not cost more than $5,000.

Companies that do not wish to use the one-year write-off may write off the cost of the asset over three years or its prescribed working life.
To claim a one-year write-off of low-value assets under Section 19A(10A) of the Income Tax Act (ITA), including those acquired on hire purchase, the following conditions must be satisfied:

1.The assets must be plant and machinery that qualify for capital allowances under Sections 19, 19A or 19A(1B) of the ITA
2.The assets must be acquired for the purposes of your trade, profession or business;
3.Each low-value asset must not cost more than $5,000; and
4.The total claim for a one-year write-off of all low-value assets must not exceed $30,000 per YA.

Source : IRAS


Related Topics

Hire Purchase in accounts payable







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