Summary
Summary Capital Allowances
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This document provides a detailed summary of capital allowances dealt with in the Tax Legislation.
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LML4804 PORTFOLIO MEMO - MAY/JUNE 2023 - SEMESTER 1 - UNISA - (DETAILED ANSWERS - DISTINCTION GUARANTEED!)
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Capital AllowancesImportant factors that will affect allowances:
1. Connected Person
a. Natural person (including relatives)
b. Trusts (including BN and BN connected persons)
c. Company
d. Close corporation
Movable Assets
S11(e Wear and tear Very last option
)
Owned Requirements:
Apportioned Value in terms of s12C, s12B, s12E
Value Owned by taxpayer / taxpayer purchased it in terms of
Used trade instalment sales agreement.
Used by taxpayer for purpose of trade
Diminished by reason of wear and tear or
depreciation.
Write off periods can be found in Binding General Rule No7(if
not given in required). If its not listed, then use the useful life
of asset. (BGR)
Value will include: (excludes finance costs)
Cost
- Purchase price
- Installation cost
- Moving cost
- Cost of foundation
MV
If taxpayer acquires Asset for no consideration (donation/
inheritance/ dividend in specie) = deemed to be MV!!
Small items (cost < R7000) may be written off in full in year it
was bought into use. (BGR)
Additional notes:
Can only be claimed on assets that do not qualify for
other allowances (firs consider other sections before
s11(e)
Can never be claimed on buildings!
APPORTIONED using months if used to carry trade.
S12B Farming / production of Requirements:
renewable products Owned by taxpayer/ taxpayer purchased in terms of
, sales agreement.
Own Used in carrying trade on farming operations.
Carry trade Used in production of biofuel.
Lower Cost Used to generate electricity from
50%/30%/20% o Wind power
No apportion o Solar energy
o Hydropower
o Biomass
Improvements to above
Cost:
Lower of cost and MV
Deduction: (new or used A) 50%/30%/20%
solar energy < 1 megawatt, 100%
Cannot apportion deduction.
Exclusions:
Asset that has already been sold
SBC s12E
Asset sold under instalment credit agreement, but
ownership is still retained by seller.
S12C Manufacturing Requirements:
Research+Development Owned by taxpayer/ in terms of Instalment Sales
Aircraft & Ships Agreement
Hotel Keeper Purpose is for trade.
o taxpayer directly in process of manufacture
o lessee directly in process of manufacture
Own/ o aircraft
operating lease o ship
Different o improvements
deductions
No Note that it must be operating lease.
apportionment
Lower cost Deduction:
New and unused: 40%/20%/20%
Used: 20%/20%/20%/20%/20%
Research + development/ improvements 50%/30%/20%
Cost:
Lower of cost and MV
Cannot apportion.
Exclusions:
Asset that has already been sold
SBC s12E
Asset sold under instalment credit agreement, but
ownership is still retained by seller.
S12E Small Business Requirements s12E(4)(a)
Corporations (SBC) 1. CC/Co-op/ Private company Pty Ltd/ Personal liability
company (Inc.)
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