Week 9 - Capital Allowances Flashcards
moveable property allowances?
s11d - repairs
s12C - manufacturing and research
s11e - wear and tear
s8(4)(a) - recoupment
s11(o) - scrapping allowance
immoveable property allowances?
s11d - repairs
s13(1) - industrial and research buildings
s13quin - commercial buildings
s8(4)(a) - recoupment
property used directly in manufacturing?
s12C and s13(1)
only allowance which is apportioned?
s11e
s11d definition?
expenditure actually incurred during the YOA on repairs of property:
- occupied/used for trade
- in respect of inc which is receivable
requirements for s11d from case law?
- must be damage
- restoring a subsidiary part of a whole
- using a different material does not in itself alter the character of what is essentially a repair
- must prove existing asset became defective. restoring to income earning capacity is not repair (if its not working as effectively. must be defective)
intention for s11d?
- must be to REPAIR, not to improve
- must be to part of the asset
- replacing broken asset is not repair
- restoring is not repair
requirements of s11e?
- moveable
- owned not leased
- used for the purposes of trade
what is s11e allowance claimed on?
- lesser of cost and MV
- use MV for free stuff, no cost needs to be incurred
rate for s11e?
will be given, based on Binding General Rule no7
apportionment in s11e?
yes, for time and for trade
(for part of year used and portion used for trade)
when is allowance claimed?
from the date the asset is brought into use
special rules in s11e?
- small assets
- permanent nature
- foundations / supporting structures
- moving expenses
small assets in s11e?
- can function in its own right
- doesn’t form part of a set
- cost less than R7000
- can be fully written off at cost in YOA it was brought into trade
permanent nature in s11e?
no deduction, except for foundations / supporting structures
foundations / supporting structures in s11e?
must: (to be deductible)
- be designed for an asset which qualifies for s11e
- must have same EUL as qualifying asset or EUL of structure is ltd to EUL of qualifying asset
moving expenses in s11e?
- must be written off over the remaining EUL of the asset
- if item already fully written off, moving costs can be fully claimed in YOA incurred
cost vs lower of MV and cost?
lower of MV and cost?
- 12C, 13quin, 11e
cost?
- 13(1)
s12C requirements?
- owned not leased
- brought into use for first time into trade; can be secondhand
- for trade
- used directly in manufacture
what is 12C claimed on?
lesser of cost and MV
no cost = no deduction
rate for 12C?
- new and unused = 40% then 20%
- secondhand = 20% in all 5
special rules in 12C?
- foundations / supporting structures
- moving expenses
(both are same as 11e rules)
s13(1) requirements?
- immoveable only
- wholly or mainly for manufacture (50% +)
- where taxpayer incurs a cost of erecting building or purchasing new building
rates for used buildings in s13(1)?
- if previous owner no allowance, you also no allowance
- allowance based on cost to most recent purchaser (not og cost to seller)
- new owner inherits old owner’s allowance rate, limited to 5%
rate for new s13(1)?
5%
special rules for s13(1)?
- improvements
- land
- recoupment
- clearing/levelling costs
improvements in s13(1)?
has to make the asset better in terms of what it can do as a process of manufacture. treated as a separate asset that gets a 5% allowance
land in s13(1)?
no allowances for land
clearing / levelling costs in s13(1)?
not included in cost of building and not qualify for allowance
recoupment for s13(1)?
- if taxpayer sells a s13(1) qualifying building and replaces it with another within 12 months from sale of initial building, the recoupment from sale will not be included into taxable income in year of purchase. it will be deferred and set off against cost of new building.
requirements for s13quin?
- new and unused
- owned
- used wholly or mainly during YOA for purposes of producing income in course of taxpayer’s trade
not allowed for s13quin?
- cannot produce exempt income
- excludes provision of residential accommodation
rate for s13quin?
5%
special rules for s13quin?
- improvements
- purchasing part of building without erecting/constructing that part
- purchasing part of an improvement without erecting/constructing that part
improvements for s13quin?
[same as 13(1)]
has to make the asset better in terms of what it can do as a process of manufacture. treated as a separate asset that gets a 5% allowance
purchasing part of building without erecting/constructing that part for 13quin?
cost = 55% of cost
lower of cost and MV
5% allowance over 20 years
purchasing part of an improvement without erecting/constructing that part for 13quin?
cost = 30% of cost
lower of cost and MV
5% allowance over 20 years
what are the req for s13sex?
- owned
- used solely for trade
- within SA
- taxpayer owns at least 5
what are the rates for s13sex?
5% for normal
10% for low-cost
what is the cost for s13sex?
lower of cost and MV
what are the special rules for s13sex?
55% for part unit acquired
30% for improvement acquired
when is a res unit considered low-cost?
- apartment costing less than 350k
- building costing less than 300k
- owner doesn’t charge rent that is more than 1%
what allowances does SBC get for a manufacturing asset?
100% in year 1
what allowance does SBC get for trade asset?
50,30,20 or s11(e), whichever provides higher allowances
