The PIC scheme has expired after the Year of Assessment (YA) 2018. Businesses are not allowed to claim PIC benefits on expenditure incurred after the basis period of YA 2018.
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The eligibility for PIC is determined based on the date when the expenditure is incurred, and not the date of submission of the cash payout application. The PIC cash payout is disbursed only when the qualifying expenditure has been incurred by the business.
An expense is incurred when the legal liability to pay arises, regardless of the date of actual payment.
If your PIC qualifying expenditure is incurred before 1 Aug 2016, the 60% cash payout rate applies. For qualifying expenditure incurred on or after 1 Aug 2016, the PIC cash payout rate is 40%.
Any expenditure incurred after the last day of the basis period of YA 2018 does not qualify for PIC benefits.
| Expenses incurred | Qualified Cash Payout Rate |
|---|---|
| Before 1 Aug 2016 | 60% |
| On or after 1 Aug 2016 | 40% |
| After the last day of the basis period of YA 2018 | Not applicable |
Determining the Basis Period for YA 2018
The following examples illustrate the last day to incur the PIC qualifying expenditure for YA 2018.
| Financial Year End | Basis Period for YA 2018 | YA | Last day to incur qualifying expenditure |
|---|---|---|---|
| 30 Jun | 1 Jul 2016 - 30 Jun 2017 | 2018 | 30 Jun 2017 |
| 30 Sep | 1 Oct 2016 - 30 Sep 2017 | 2018 | 30 Sep 2017 |
| 31 Dec | 1 Jan 2017 - 31 Dec 2017 | 2018 | 31 Dec 2017 |
Treatment for Straddled Items
For expenditure incurred on PIC IT and automation equipment and registration of Intellectual Property Rights (IPR), partial conversion into cash payout is not allowed. This is because the conversion must be done on a 'per equipment or per IPR registration basis' on the full cost of the qualifying expenditure, subject to the expenditure cap.
If the qualifying expenditure is greater than the amount qualifying for a cash payout conversion, the excess expenditure incurred is forfeited and is not available for deduction claims against the business income.
Learn about the treatment for straddled items beyond YA 2018 (PDF, 373KB) if you incur expenditure over 2 or more YAs and this extends beyond YA 2018.
Examples on When an Expenditure is Considered Incurred for the Purpose of Determining the Cash Payout Rate
In all the following examples, the financial year end of the business is assumed to be 31 Dec.
Example 1: Equipment Purchased with Cash
Your company purchased a copier machine on 1 Jul 2016 and the terms in the sales invoice provided for cash-on-delivery.
- Full payment was made on 1 Jul 2016 but the copier was delivered on 15 Jul 2016. The expenditure is considered as incurred on 15 Jul 2016 (i.e. in YA 2017) and you qualify for 60% cash payout rate.
Purchase Date Payment in Full Delivery of equipment Expenditure considered incurred on Qualified Cash Payout Rate 1 Jul 2016 1 Jul 2016 15 Jul 2016 15 Jul 2016 60% - Full payment was made on 1 Jul 2016 but the copier was only delivered on 15 Aug 2016 . The expenditure is considered as incurred on 15 Aug 2016 (i.e. in YA 2017) and you qualify for 40% cash payout rate.
Purchase Date Payment in Full Delivery of equipment Expenditure considered incurred on Qualified Cash Payout Rate 1 Jul 2016 1 Jul 2016 15 Aug 2016 15 Aug 2016 40%
Example 2: Equipment Purchased under Hire Purchase (HP)
Your company entered into a HP agreement with the vendor for a copier machine on 30 Jun 2016 (i.e. in YA 2017). Based on the agreement, the first instalment was scheduled on 30 Sep 2016. For equipment acquired under HP agreement, the applicable PIC cash payout rate depends on when the HP agreement is signed. In this scenario, the applicable cash payout rate is 60% as the company entered into the agreement prior to 1 Aug 2016. The 60% conversion rate applies even for instalments* paid on or after 1 Aug 2016.
* The timing of the disbursement of cash payout is dependent on the actual principal sum repaid during each quarter or combined quarters. Learn more about cash payout for PIC IT and automation equipment under a hire-purchase (HP) agreement.
Example 3: Training
Your company entered into a contract on 5 Jul 2016 with a training provider.
- Your company paid the full sum for a 1-day training course on 5 Jul 2016. The training was held on 20 Jul 2016. The company qualifies for 60% cash payout rate as the employee attended the training on 20 Jul 2016 (i.e. in YA 2017).
- Your company paid the full sum for a 1-day training course on 5 Jul 2016. The training was held on 7 Dec 2016. The company qualifies for 40% cash payout rate as the employee attended the training on 7 Dec 2016 (i.e. in YA 2017).
View more examples of when an expenditure is considered incurred (PDF, 158KB) for the purpose of determining the cash payout rate.
Examples on When an Expenditure is Considered Incurred in Relation to the Expiry of the PIC Scheme After YA 2018
In all the following examples, the financial year end of the business is assumed to be 31 Dec.
Example 1: Equipment Purchased with Cash
Your company purchased a copier machine on 1 Dec 2017 and the terms in the sales invoice provided for cash-on-delivery. Full payment was made on 1 Dec 2017 but the copier was only delivered on 15 Jan 2018.
In this case, the legal liability to pay crystallises upon the delivery of equipment. Hence, the expenditure is considered as incurred on 15 Jan 2018 (i.e. in YA 2019) and the company will not be eligible to claim PIC cash payout on this expenditure. The cost of the copier machine paid on 1 Dec 2017 is regarded as a prepayment.
Example 2: Equipment Purchased under Hire Purchase (HP)
Your company entered into a HP agreement with the vendor for a copier machine on 30 Nov 2017. Based on the agreement, the first instalment was scheduled on 3 Jan 2018.
For equipment acquired under HP agreement, the applicable PIC cash payout rate depends on when the HP agreement is signed. In this scenario, the applicable cash payout rate is 40% as the company entered into the agreement after 1 Aug 2016 but before the end of YA 2018. The 40% conversion rate applies even for instalments* paid on or after 1 Jan 2018.
* The timing of the disbursement of cash payout is dependent on the actual principal sum repaid during each quarter or combined quarters. Learn more about cash payout for PIC IT and automation equipment under a hire-purchase (HP) agreement.
Example 3: Training
Your company entered into a contract on 5 Nov 2017 with a training provider and paid the full sum for a 1-day training course which was held on 7 Jan 2018.
The company will not be eligible to claim the PIC cash payout on this training expenditure. The training expenditure paid on 5 Nov 2017 is regarded as a prepayment and the expenditure is incurred on the date of training (i.e. 7 Jan 2018) in YA 2019.
View more examples of when an expenditure is considered incurred (PDF, 158KB) in relation to the expiry of the PIC scheme after YA 2018.