What are the 3 main Capital Allowances?
- S11(e) - wear & tear
- S12C - manufacturing plant/machinery allowances
- S13 - Building allowances
What are the principles for S11(e)- wear/tear allowances?
- "smaller" assets (equipment/vehicles) - used for trade - are apportioned for period used in the year. - write-off period differ - claimed if the TP= owner
What happens to small items that are < R7000
- written off in full
- must function on their own
- can’t be part of a set
What are the principles for S12C- Manufacturing plant/equipment allowances?
- “bigger” assets
- used in process of MANUFACTURE
- NOT apportioned
- must be owner
- new & unused
What is the write off periods for assets that qualify for a S12C allowance
New: - 4 years - 40/20/20/20 2d hand/Ships/Planes: - 5 years - 20/20/20/20/20
What 3 building allowances can be claimed?
- S13 - Manufacturing/industrial buildings
- S13quin - Commercial Buildings
- S13sex - Residential Buildings
What are the principles of S13- manufacturing buildings?
- Only the building
- Used in the process of manufacturing
- TP = owner
- allowances ito date erected
- NO apportionment
What are the principles relating to used manufacturing buildings?
- entitled to allowance which was received by seller
- allowance claimable on new cost
- if purchased after 1/4/2000 - only 5% allowance
What are the principles relating to the Section 13quin allowances for commercial buildings?
- needs to be new and unused
- producing income in trade
- 1 April 2007
- not residential accommodation
- NO apportionment
- write off @ 5%
What are the requirements that a Taxpayer needs to meet to qualify for a Section13sex allowance
- New/unused
- Improvements should be new/unused
- TP is owner of units
- Used solely for purpose of trade
- Unit is in RSA
- TP needs to own at least 5 residential units
How is the allowance calculated for Section 13sex?
- On cost price
- 5% on NORMAL unit
- 10% on LOW COST unit
- NO apportionment
How is the cost price determined ito S13sex?
- If TP acquires the unit from a developer then we will acquire only:
- 55% of acquisition price
- 30% of improvements acquisition price
What is the cost price of a low cost unit?
LOW COST UNIT:
- building = < 300 000
- apartment = < 350000
What is a Small Business Corporation?
- CC/Private company
- natural persons as shareholders
- GI < 20mil
- members do not have shares/interest in another company
- <20% total receipts & accruals = investment income and personal services rendered
- not employment comp
What is the principles and the deduction for plant and machinery for a SBC?
S12E
- TP = owner
- BIU @ 1/4/2001
- used in process of manufacture
deduction = 100% of cost
What are the principles and the deduction for non-manufacturing assets(s12E(1)) ?
- not used in process of manufacture
- written off over 3 years form BIU
50/30/20 - NO apportionment
- @ 1/4/2005
What are the deductions for moving costs and improvements?
- written off over remainder of allowance
- deduct full costs when asset is written off fully
- Improvements are treated as a separate asset
What is a general recoupment?
S8(4)(a)
- inclusion of any recovery of allowances/deduction previously claimed ito section 11-20
What are the important steps needed to be followed when disposing of an asset?
1- deduct current year allowances
2- calculate and include/deduct any recoupment/loss on disposal
3- Calculate any CGT
How to calculate a recoupment?
recoupment = selling price(limited to cost) - tax value so, recoupment if: sp > tv
When can a deduction be claimed ito s11(o)
- scrapping allowances
- must have qualified for a section 11(e), 12C or 12E allowance
- expected useful life for tax purposes must not > 10y
- amount must have been received form
- alienation
- loss/ destruction
- not applicable to buildings
What impact does a scrapping allowance have on the taxpayer’s taxable income?
It will reduce the taxable income as it will be seen as an allowance.
