Calculating Capital Allowances

Businesses can claim capital allowances when the expense has been incurred. An expense is incurred when the legal liability to pay has arisen, regardless of the date of actual payment of the money. 

Methods for Calculating Capital Allowances

There are a few methods for calculating capital allowances. You may write off the cost of an asset over one year, two years, three years or over the prescribed working life of the asset.

Section 19A

Section 19

100% Write-Off in One Year (Section 19A)

Under Section 19A, assets that qualify for 100% write-off are:
a. computers
b. prescribed automation equipment
c. low-value assets

Computers and Prescribed Automation Equipment

The prescribed automation equipment are found in these lists:
Some commonly-claimed prescribed automation equipment are computers, laptops, printers and computer software.
From Years of Assessment (YAs) 2011 to 2018, as part of the Productivity and Innovation Credit Scheme, expenditure incurred to acquire computers and prescribed automation equipment can qualify for 400% allowance instead of 100% allowance (subject to the relevant PIC expenditure cap), and 100% allowance on the expenditure exceeding the cap. The allowance is granted on due claim.

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)

You can also choose to defer the capital allowance claims to subsequent YAs. Please refer to Deferring Capital Allowance Claims to find out more about deferring your capital allowance claims

Examples of 100% Write-Off in One Year for Computer and Prescribed Automation Equipment

Your company purchased a computer for $2,000 and a printer for $200 by cash in the year 2015.

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

AA for printer = 100% x $200 = $200

Your capital allowance schedule is as follows

Description

Computer ($)

Printer ($)

Cost

2,000

200

YA 2016 AA

2,000

200

Tax written down value (TWDV) c/f

0

0

You company purchased a computer costing $2,000 in year 2015 under hire purchase. The company has a 31 Dec year end.

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 instalments

 

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 2015 and the remaining three instalments were paid in year 2016.

The deposit and principal payments in year 2015 = $100 + (2 x $380) = $860
The principal payments in year 2016 = 3 x $380 = $1,140

YA 2016 AA = 100% x $860 = $860

YA 2017 AA = 100% x $1,140 = $1,140

Your capital allowance schedule is as follows:

Description

Computer ($)

Cost

2,000

YA 2016 AA

860

Tax written down value (TWDV) c/f

1,140

YA 2017 AA

1,140

TWDV c/f

0

Low Value Assets

Companies may choose to write off low-value assets in one year provided certain conditions are satisfied. A low-value asset is one that does not cost more than $5,000 (from YA 2005 to 2012, the threshold was $1,000).

Companies that do not wish to use the one-year write-off may write off the cost of the asset over three years or its prescribed working life.

Plant and machinery that already qualify for a one-year write-off are not covered here.

Conditions for One Year Write-Off of Low-Value Assets

To claim a one-year write-off of low-value assets under Section 19A(10A) of the Income Tax Act (ITA), including those acquired on hire purchase, the following conditions must be satisfied:

  1. The assets must be plant and machinery that qualify for capital allowances under Sections 19, 19A or 19A(1B) of the ITA;
  2. The assets must be acquired for the purposes of your trade, profession or business;
  3. Each low-value asset must not cost more than
    1. $5,000 (effective YA 2013 onwards); or
    2. $1,000 (effective YA 2005 to YA 2012); and
  4. The total claim for a one-year write-off of all low-value assets must not exceed $30,000 per YA.

If the amount exceeds $30,000, you can still claim capital allowances over three years/ the prescribed working life for the low-value assets exceeding the cap for the YA.

If you do not wish to claim the one-year write-off for low value assets, you can claim capital allowances over three years/ prescribed working life for the assets instead.

How the One-Year Write-Off for Low-Value Assets Works

The low-value assets that can be written off in one year in any YA, subject to a total claim of $30,000, are:

  1. Low-value assets that are acquired in the YA; and
  2. Low-value assets that are acquired before the YA where:
    1. no claim for capital allowance has been made before (i.e. claim for capital allowance was deferred previously).
    2. a claim for capital allowance was previously made under Sections 19, 19A(1) or 19A(1B) and there is a tax written down value brought forward to the current YA.
  3. Hire Purchase Assets

    An asset acquired under hire purchase terms must cost no more than $5,000 (effective from YA 2013) or $1,000 (effective from YA 2005 to 2012) in order to qualify for the one-year write-off on its instalment paid in any YA.

    Indicate clearly in your capital allowance schedule the assets that are claimed on the basis of Section19A(10A) and submit the capital allowance claims accordingly in your income tax returns.

    Identifying Low-Value Assets that Qualify for 100% Write-Off

    Company A purchased 7 pieces of Asset X at $4,400 each at a total cost of $30,800 in YA 2017.

    In YA 2016, Company A also purchased:

    1. Asset Y at $1,500 for which claim for capital allowance was deferred; and
    2. Asset Z at $3,000, for which claim for capital allowance was made under Section 19A(1) (i.e. three-year write-off).

      Company A claimed capital allowance of $1,000 ($3,000 / 3 years) on this asset in YA 2016, and a tax written down value of $2,000 ($3,000 - $1,000) on Asset Z was carried forward to YA 2017.

    3. All the 9 pieces of assets qualify for capital allowance.

    Computing the Total Claim under One-Year Write-Off

    Company A can claim a one-year write-off on the cost of the following assets in YA 2016:

    Cost of 6# pieces of new Asset X ($4,400 x 6)

    $ 26,400

    Add: Cost of Asset Y purchased in YA 2016

    $ 1,500

      
    Tax written down value of Asset Z brought forward from YA 2016

    $ 2,000

    Total claim under one-year write-off

    $ 29,900*

    Explanation of the Claim

    * Within the total cap of $30,000 per YA.

    # Company cannot claim the 7th piece of Asset X under Section 19A(10A) as the additional cost of $4,400 will cause the current total claim of $29,900 to exceed the $30,000 cap.

    On the remaining piece of new Asset X costing $4,400, Company A can claim capital allowances over three years or over its useful life. Assuming that capital allowances are claimed over three years, the capital allowances for YA 2017 for this asset will be $1,467 ($4,400 / 3 years).

    In total, the capital allowance claim for YA 2017 will be $31,367 ($29,900 + $1,467).

See Also

Write-Off Over Three Years (Section 19A)

Effective YA 2009, you can use this method to claim capital allowance for all assets that qualify for capital allowance. You can also choose to defer the capital allowance claims to subsequent YAs. Please refer to Deferring Capital Allowance Claims to find out more about deferring your capital allowance claims.

Under the three-year 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)

Examples of Write-Off Over Three Years

Your company purchased office equipment for $3,000 with cash in year 2016.
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 2017 AA

1,000

Tax written down value (TWDV) c/f

2,000

YA 2018 AA

1,000

TWDV c/f

1,000

YA 2019 AA

1,000

TWDV c/f

0

Your company acquired an office equipment costing $2,000 in year 2016 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 instalments 

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 2016 and the remaining three instalments were paid in year 2017.

The deposit and principal payments in year 2016 = $100 + (2 x $380) = $860
The principal payments in year 2017 = 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 2017

YA 2018

YA 2019

YA 2020

2016

860

287

287

286

 

2017

1,140

 

380

380

380

Total

287

667

666

380

Your capital allowance schedule is as follows:

Description

Office equipment ($)

Cost

2,000

YA 2017 AA

287

Tax written down value (TWDV) c/f

1,713

YA 2018 AA

667

TWDV c/f

1,046

YA 2019 AA

666

TWDV c/f

380

YA 2020 AA

380

TWDV c/f

0

Write-Off Over Two Years (Section 19A)

As announced in Budget 2009, capital expenditure incurred on plant and machinery acquired in the basis periods for the YAs 2010 and 2011 can qualify for accelerated write-down over two years instead of three years .

This was to support companies that intended to invest in new plant and machinery in preparation for the recovery after the economic downturn in 2008/2009.

With this change, companies can elect to write down the costs of plant and machinery acquired in the basis periods for YAs 2010 and 2011 over two years at the rate of 75% in the first YA of claim and the remaining 25% in the second YA. Companies can also defer their capital allowance claims to subsequent YAs. The two year write-down of 75% and 25% will still apply when a claim for the capital allowance is eventually made. Please refer to Deferring Capital Allowance Claims to find out more about deferring your capital allowance claims.

For hire purchase agreements entered into during the basis periods for YAs 2010 and 2011, the two year write-down of 75% and 25% will continue to apply to the principal payments made (including deposit paid where applicable) even though the instalments are paid after YA 2011. However, if the hire purchase agreements were entered into before YA 2010, the instalments paid in YAs 2010 and 2011 will not qualify for the accelerated write-down.

For asset purchased with cash:

AA in Year 1 = 75% of the cost of asset

AA in Year 2 =  25% of the cost of the asset

For asset purchased under hire purchase:

AA in Year 1 = 75% of the principal payment (and deposit paid where applicable)

AA in Year 2 =  25% of the principal payment

Examples of Write-Off Over Two Years

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

AA for YA 2011 = 75% x $3,000 = $2,250

AA for YA 2012 =  25% x $3,000 = $750

Your capital allowance schedule is as follows:

Description

Office equipment ($)

Cost

3,000

YA 2011 AA

2,250

Tax written down value (TWDV) c/f

750

YA 2012 AA

750

TWDV c/f

0

Your company acquired 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 instalments

 

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

Tax written down value (TWDV) c/f

1,355

YA 2012 AA

1,070

TWDV c/f

285

YA 2013 AA

285

TWDV c/f

0

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 with 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 YA:

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 a deposit paid and/ 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 motorcycle is eight years)

You can also choose to defer the capital allowance claims to subsequent YAs. Please refer to Deferring Capital Allowance Claims to find out more about deferring your capital allowance claims. 

Capital allowance claim for motor vehicles 

No capital allowance is to be given on private cars (S-plated cars), RU-plated cars and company cars (Q-plated or S-plated cars), except where the cars are registered as "private hire cars"/"cars for instructional purpose" and are hired out or used for providing driving instruction in the course of the company's business.

Apart from private cars (S-plated cars), RU-plated cars and company cars (Q-plated or S-plated cars), costs of other motor vehicles such as vans, lorries and motor cycles acquired for business use would qualify for capital allowances under Section 19 or 19A of the Income Tax Act.

Expenditure incurred on obtaining a Certificate of Entitlement (COE) to acquire a motor vehicle is part of the cost of the motor vehicle. If the motor vehicle qualifies for capital allowance, the cost of obtaining the COE may be included when claiming capital allowance on the motor vehicle. In addition, the amount paid by a registered owner of an existing vehicle upon renewal of the COE to enable the continued operation of the vehicle will be regarded as an additional cost of the vehicle for the purposes of claiming allowances under Section 19 or 19A. 

However, for expenditure incurred to obtain a COE which is not subsequently used to acquire a vehicle, the expenditure incurred will not be granted capital allowance. 

Foreign registered vehicles 

From YA 2014 onwards, capital expenditure incurred on a car registered outside Singapore and used exclusively outside Singapore for business purposes will be granted capital allowance. There is no cap on the capital allowance.

Prior to YA 2014, capital allowance may be granted on the purchase of a motor vehicle that is registered outside Singapore and used exclusively outside Singapore for business purposes. The capital allowance on the cost of the car is subject to a cap of $35,000.

Computation of capital allowance for motor vehicles

Capital allowance can be claimed either over three years (Section 19A) or over the prescribed working life of the motor vehicle (Section 19). 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 with cash on or after YA 2009:

AA = 1/3 x the cost of asset

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

AA = 1/3 x the tax written down value remaining unallowed as at the beginning of YA 2009

Examples of Write-Off Over the Prescribed Working Life of the Asset

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 from 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

Tax written down value (TWDV) c/f

30,000

YA 2009 AA

6,000

TWDV c/f

24,000

YA 2010 AA

6,000

TWDV c/f

18,000

YA 2011 AA

6,000

TWDV c/f

12,000

YA 2012 AA

6,000

TWDV c/f

6,000

YA 2013 AA

6,000

TWDV c/f

0

Example 1.2: Switch to claim capital allowance over three years from 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

Tax written down value (TWDV) c/f

30,000

YA 2009 S19A AA

10,000

TWDV c/f

20,000

YA 2010 S19A AA

10,000

TWDV c/f

10,000

YA 2011 S19A AA

10,000

TWDV c/f

0

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 instalments 

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 6 instalments were paid in year 2007, 12 instalments payable in year 2008 and the remaining 6 instalments payable in year 2009.

Your IA and AA for each YA are as follows:

Year

Number of instalments 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

Tax written down value (TWDV) c/f

35,760

YA2009 IA

3,840

AA

6,000

TWDV c/f

25,920

YA 2010 IA

1,920

AA

6,000

TWDV c/f

18,000

YA 2011 AA

6,000

TWDV c/f

12,000

YA 2012 AA

6,000

TWDV c/f

6,000

YA 2013 AA

6,000

TWDV c/f

0

Example 2.2: Switch to claim capital allowance over three years from YA 2009 onwards

Your IA and AA for each YA are as follows:

Year

Number of instalments 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

Tax written down value (TWDV) c/f

35,760

YA2009 AA

8,720

TWDV c/f

27,040

YA 2010 AA

11,920

TWDV c/f

15,120

YA 2011 AA

11,920

TWDV c/f

3,200

YA 2012 AA

3,200

TWDV c/f

NIL

Summary table showing the different ways to claim capital allowances  

How to calculate

Qualifying assets

Annual
allowance (AA)

Over working life of asset
[Section 19]

  • Apply to all qualifying assets
  • Refer to Sixth Schedule of the Income Tax Act for working life
  • Initial allowance (IA)
    = 20% of cost
  • AA = (80% of cost) / No. of years of working life

Three-year write-off
[Section 19A(1)]

Apply to all qualifying assets

AA = 1/3 of cost

One-year write-off
(for specific assets)
[Section 19A(2)]

  • Computers
  • Prescribed automation equipment listed in Income Tax (Automation Equipment) Rules 2004; and Amendment Rules 2010 (effective from 15 Dec 2010)

AA = 100% of cost

One-year write-off
(only for low-value assets)
[Section 19A(10A)]

Low-value assets

  • Cost of each asset not more than $5,000*
  • Total claim for one-year write-off of all such assets capped at $30,000 per YA

* Before YA 2013, it was $1,000

AA = 100% of cost

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