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For companies

There are generally a few methods of calculating capital allowance:

Section 19A

Section 19

Illustrations on capital allowance claim
  1. Write-off in one year

    Example 1: Asset purchased by cash
    Example 2: Asset purchased by hire purchase

  2. Write-off over three years

    Example 1: Asset purchased by cash
    Example 2: Asset purchased by hire purchase

  3. Write-off over two years

    Example 1: Asset purchased by cash
    Example 2: Asset purchased by hire purchase

  4. Write-off over the prescribed working life of the asset

    Example 1: Qualifying motor vehicle purchased by cash
    Example 2: Qualifying motor vehicle purchased by hire purchase

100% write-off in one year (Section 19A)

Assets that qualify for 100% write-off are:

Under the 100% write-off, capital allowance is allowed in the form of annual allowance (AA) where:

For assets purchased by cash:

AA = 100% of the cost of the asset

For assets purchased under hire purchase:

AA = 100% of the principal payment (and deposit paid where applicable)

Example 1 (Asset purchased by cash)

Your company purchased a computer for $2,000 and a telephone for $200 by cash in the year 2013.

AA for computer = 100% x 2,000 = 2,000

AA for telephone = 100% x 200 = 200

Your capital allowance schedule is as follows
Description Computer Telephone
Cost 2,000 200
YA 2014 AA 2,000 200
Written down value (WDV) c/f 0 0

 

Example 2 (Asset purchased under hire purchase)

You company purchased a computer costing $2,000 in year 2013 under hire purchase.

AA = 100% of the principal payment (plus deposit paid where applicable)

Assuming the details of the hire purchase agreement are as follows:

Purchase price   $ 2,000
Deposit   $ 100
Hire purchase interest   $ 50
Number of instalment      5
Amount payable per instalment   $ 390
Hire purchase interest per instalment 50 / 5 $ 10
Principal payment per instalment 390 - 10 $ 380

Assuming a deposit of $100 and 2 instalments were paid in year 2013 and the remaining three instalments were paid in year 2014.

The deposit and principal payments in year 2013 = 100 + (2 x 380) = 860

The principal payments in year 2014 = 3 x 380 = 1,140

YA 2014 AA = 100% x 860 = 860

YA 2015 AA = 100% x 1,140 = 1,140

Your capital allowance schedule is as follows:
Description Computer
Cost 2,000
YA 2014 AA 860
Written down value (WDV) c/f 1,140
YA 2015 AA 1,140
Written down value (WDV) c/f 0

 
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Write-off over three years (Section 19A)

With effect from YA 2009, you can use this method to claim capital allowance for all assets that qualify for capital allowance.

For YA 2008 and before, three years write-off is allowable for all qualifying assets except for commercial vehicles with maximum laden weight not exceeding 3,000 kg and motor cycle. For details on how to compute capital allowance for motor vehicles, please refer to Claiming capital allowance over prescribed working life of asset (Section 19).

Under the three years write-off, capital allowance is allowed in the form of Annual allowance (AA) where

For asset purchased by cash:

AA for each year = 1/3 of the cost of asset

For asset purchased under hire purchase:

AA = 1/3 of the principal payment (and deposit paid where applicable) 

Example 1 (Asset purchased by cash)

Your company purchased office equipment for $3,000 by cash in year 2013.

AA for each YA = 1/3 x 3,000 = 1,000

Your capital allowance schedule is as follows:
Description Office equipment
Cost 3,000
YA 2014 AA 1,000
Written down value (WDV) c/f 2,000
YA 2015 AA 1,000
Written down value (WDV) c/f 1,000
YA 2016 AA 1,000
Written down value (WDV) c/f 0

 

Example 2 (Asset purchased under hire purchase)

You company purchased an office equipment costing $2,000 in year 2013 by hire purchase. The details of the hire purchase agreement are as follows:

Purchase price   $ 2,000
Deposit   $ 100
Hire purchase interest   $ 50
Number of instalment      5
Amount payable per instalment   $ 390
Hire purchase interest per instalment 50 / 5 $ 10
Principal payment per instalment 390 - 10 $ 380

Assuming that a deposit of $100 and two instalments were paid in year 2013 and the remaining three instalments were paid in year 2014.

The deposit and principal payments in year 2013 = 100 + (2 x 380) = 860

The principal payments in year 2014 = 3 x 380 = 1,140

AA for each YA is computed as follows:
Year of payment Deposit and principal amount paid Amount of AA to be claimed in:
    YA 2014 YA 2015 YA 2016 YA 2017
2013 860 287 287 286  
2014 1,140   380 380 380
Total 287 667 666 380

 

Your capital allowance schedule is as follows:
Description  Office equipment 
Cost 2,000
YA 2014 AA 287
Written down value (WDV) c/f 1,713
YA 2015 AA 667
Written down value (WDV) c/f 1,046
YA 2016 AA 666
Written down value (WDV) c/f 380
YA 2017 AA 380
Written down value (WDV) c/f 0

 

Write-off over two years (Section 19A)

As announced in the 2009 Budget Statement, capital expenditure incurred on plant and machinery acquired in the basis periods for the YAs 2010 and 2011 can be allowed an accelerated write-down over two years instead of three years. This was to support companies who intend to invest in new plant and machinery in preparation for the recovery..

With this change, companies can write down the costs of these newly acquired plant and machinery within two years at the rate of 75% for the first YA of claim and remaining 25% in the second YA of claim. 

For asset purchased by cash:

AA in Year 1 = 3/4 of the cost of asset
AA in Year 2 = 1/4 of the cost of the asset

For asset purchased under hire purchase:

AA in Year 1 = 3/4 of the principal payment (and deposit paid where applicable)
AA in Year 2 = 1/4 of the principal payment

Example 1 (Asset purchased by cash)

Your company purchased office equipment for $3,000 by cash in year 2010.

AA for YA 2011 = 3/4 x 3,000 = 2,250

AA for YA 2012 = 1/4 x 3,000 = 750

 

Your capital allowance schedule is as follows:
Description Office equipment
Cost 3,000
YA 2011 AA 2,250
Written down value (WDV) c/f 750
YA 2012 AA 750
Written down value (WDV) c/f 0


Example 2 (Asset purchased under hire purchase)

Your company purchased an office equipment costing $2,000 in year 2010 by hire purchase. The details of the hire purchase agreement are as follows:

Purchase price   $ 2,000
Deposit   $ 100
Hire purchase interest   $ 50
Number of instalment      5
Amount payable per instalment   $ 390
Hire purchase interest per instalment 50 / 5 $ 10
Principal payment per instalment 390 - 10 $ 380

Assuming that a deposit of $100 and two instalments were paid in year 2010 and the remaining three instalments were paid in year 2011.

The deposit and principal payments in year 2010 = 100 + (2 x 380) = 860

The principal payments in year 2011 = 3 x 380 = 1,140

AA for each YA is computed as follows:
Year of payment Deposit and principal amount paid Amount of AA to be claimed in:
    YA 2011 YA 2012 YA 2013
2010 860 645 215  
2011 1,140   855 285
Total 645 1,070 285

 

Your capital allowance schedule is as follows:
Description  Office equipment 
Cost 2,000
YA 2011 AA 645
Written down value (WDV) c/f 1,355
YA 2012 AA 1,070
Written down value (WDV) c/f 285
YA 2013 AA 285
Written down value (WDV) c/f 0

 
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Write-off over the prescribed working life of the asset (Section 19)

Under this method, capital allowance is granted over an asset's prescribed working life based on the Sixth Schedule of the Income Tax Act. The initial allowance (IA) and annual allowance (AA) are computed as follows:

For asset purchased by cash:

In the first YA relating to the year in which the fixed asset was purchased:

IA = 20% x the cost of asset

AA = (80% x the cost of asset) / number of years of working life

In the second and subsequent YAs:

IA is not applicable.

AA = (80% x the cost of asset) / number of years of working life* (same as the first YA)

For asset purchased under hire purchase:

In the YA where there is deposit or instalment payments:

IA = 20% of the principal amount (and deposit paid where applicable)

AA = (80% x the cost of asset) / number of years of working life*

In the YA where there is no payment made:

IA is not applicable

AA = (80% x the cost of asset) / number of years of working life

*The number of years of working life is based on the Sixth Schedule of the Income Tax Act (e.g. the working life for motor vehicle is six years and that for motor cycle is eight years)

Capital allowance claim for motor vehicles and motor cycles

Generally, motor vehicle refers to a vehicle that is constructed for not more than 7 passengers (excluding the driver) and whose unladen weight does not exceed 3,000kg.

However, 'S'-plated private passenger cars do not qualify for capital allowance.

For YA 2008 and before, capital allowance is claimed over the prescribed working life (Section 19) i.e. 6 years for motor vehicles and 8 years for motor cycles.

With effect from YA 2009, capital allowance can be claimed either over three years (Section 19A) or over the prescribed working life (Section 19).  This includes motor vehicles and motor cycles purchased before YA 2009. For qualifying motor vehicles acquired during the basis periods for the YAs 2010 and 2011, companies can claim accelerated write-down over two years instead of three years.  For more details and examples, please click here.

For motor vehicle purchased by cash on or after YA 2009:

AA = 1/3 x  the cost of asset

For motor vehicle purchased by cash before YA 2009, where capital allowance was previously computed based on the prescribed working life:

AA = 1/3 x the written down value brought forward from YA 2008

For more details, please refer to example 1 below.

Example 1 (Asset purchased by cash)

Your company purchased a van that cost $45,000 in year 2007.

For YA 2008, capital allowance must be calculated based on write-off over the prescribed working life of six years. 

For YA 2009 onwards, you can continue to claim for capital allowance over six years (refer to example 1.1) or switch to claim capital allowance over three years (refer to example 1.2) .

Example 1.1 (continue to claim capital allowance over six years for YA 2009 onwards):

AA = (80% x 45,000) / 6 = 6,000

Your capital allowance schedule is as follows:
Description Van
Cost  $ 45,000
YA 2008 IA $ 9,000
AA $ 6,000
Written down value (WDV) c/f $ 30,000
YA 2009 AA $ 6,000
WDV c/f $ 24,000
YA 2010 AA $ 6,000
WDV c/f $ 18,000
YA 2011 AA $ 6,000
WDV c/f $ 12,000
YA 2012 AA $ 6,000
WDV c/f $ 6,000
YA 2013 AA $ 6,000
WDV c/f 0
   

 

Example 1.2 (switch to claim capital allowance over three years for YA 2009 onwards)

YA 2008

IA = 20% x 45,000 = 9,000

AA = (80% x 45,000) / 6 = 6,000

YA 2009 onwards (switch to write-off over three years)

AA = 1/3 x 30,000 = 10,000

Your capital allowance schedule is as follows:
Description Van
Cost  $ 45,000
YA 2008 S19 IA $ 9,000
AA $ 6,000
Written down value (WDV) c/f $ 30,000
YA 2009 S19A AA $ 10,000
WDV c/f $ 20,000
YA 2010 S19A AA $ 10,000
WDV c/f $ 10,000
YA 2011 S19A AA $ 10,000
WDV c/f 0

 

Example 2 (Asset purchased under hire purchase)

Your company purchased a van that cost $45,000 in year 2007.

For YA 2008, capital allowance must be calculated based on write-off over the prescribed working life of six years. 

For YA 2009 onwards, you can continue to claim for capital allowance over six years (refer to example 2.1) or switch to claim capital allowance over three years (refer to example 2.2).

Example 2.1 (continue to claim capital allowance over six years for YA 2009 onwards):

Assuming the van was purchased under hire purchase and the hire purchase details are as follows:

Purchase price   $ 45,000
Deposit   $ 6,600
Hire purchase interest   $ 2,400
Number of instalment      24
Amount payable per instalment   $ 1,700
Hire purchase interest per instalment 2,400 / 24 $ 100
Principal payment per instalment 1,700 - 100 $ 1,600

Assuming six instalments were paid in year 2007, 12 instalments payable in year 2008 and the remaining six instalments payable in year 2009.

Your IA and AA for each YA is as follows:
Year Number of instalment paid deposit + principal amount paid YA IA AA
2007 6 6,600 + (6 x 1,600) = 16,200 2008 20% x 16,200 = 3,240 (80% x 45,000) / 6 = 6,000
2008 12 12 x 1,600 = 19,200 2009 20% x 19,200 = 3,840 (80% x 45,000) / 6 = 6,000
2009 6 6 x 1,600 = 9,600 2010 20% x 9,600 = 1,920 (80% x 45,000) / 6 = 6,000

Your capital allowance schedule is as follows:
Description Van
Cost  $ 45,000
YA 2008 IA $ 3,240
AA $ 6,000
Written down value (WDV) c/f $ 35,760
YA2009 IA $ 3,840
AA $ 6000
WDV c/f $ 25,920
YA 2010 IA $ 1,920
AA $ 6,000
WDV c/f $ 18,000
YA 2011 AA $ 6,000
WDV c/f $ 12,000
YA 2012 AA $ 6,000
WDV c/f $ 6,000
YA 2013 AA $ 6,000
WDV c/f 0

Example 2.2 (switch to claim capital allowance over three years for YA 2009 onwards):

Your IA and AA for each YA is as follows:
Year Number of instalment paid deposit + principal amount paid YA IA AA
2007 6 6,600 + (6 x 1,600) = 16,200 2008 20% x 16,200 = 3,240 (80% x 45,000) / 6 = 6,000
2008 12 12 x 1,600 = 19,200 2009 - (6,960* + 19,200) / 3 = 8,720
2009 6 6 x 1,600 = 9,600 2010 - (6,960* + 19,200 + 9,600) / 3 = 11,920

* TWDV c/f from YA2008 = Principal amount paid to date + Deposit paid to date (if any) - Initial allowance claim - Annual allowance claims to date = 16,200 - 3,240 - 6,000 = 6,960

Your capital allowance schedule is as follows:
Description Van
Cost  $ 45,000
YA 2008 IA $ 3,240
AA $ 6,000
Written down value (WDV) c/f $ 35,760
YA2009 AA $ 8,720
WDV c/f $ 27,040
YA 2010 AA $ 11,920
WDV c/f $ 15,120
YA 2011 AA $ 11,920
WDV c/f $ 3,200
YA 2012 AA $ 3,200
WDV c/f NIL

 
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Last Updated on 21 February 2014


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