Page 8 - RSM Budget 2020 Highlights

CORPORATIONS AND BUSINESSES

Acceleration of Capital Allowances Claim for
Plant and Machinery
Current

A taxpayer which incurs capital expenditure on the
acquisition of plant and machinery (“P&M”) for the
purposes of its trade, profession or business may
claim capital allowances (i.e. write off the cost of
acquiring the P&M). Capital allowances are allowed
under Section 19 of the ITA over the working life of
the assets as specified in the Sixth Schedule, or over
three years as provided for under Section 19A(1) of
the ITA.

Proposed changes
A taxpayer which incurs capital expenditure on the
acquisition of P&M in the basis period for YA2021 (i.e.
FY 2020) will have an option to accelerate the write-
off of the cost of acquiring such P&M over two years.
This option, if exercised, is irrevocable.

The rates of accelerated capital allowances allowed
are as follows:
 75% of the cost incurred to be written off in the
first year (i.e. YA 2021); and
 25% of the cost incurred to be written off in the
second year (i.e. YA 2022).

The above option will be in addition to the options
currently available under Sections 19 and 19A of the
ITA.

No deferment of capital allowances claims is allowed
under the above option. This means that if a taxpayer
opts for the accelerated write-off option, it needs to
claim the capital expenditure incurred for acquiring
P&M based on the rates of 75% (in YA 2021) and 25%
(in YA 2022).

Effective date

Acquisition of qualifying P&M in basis period for YA
2021.

Comments
 The proposed accelerated capital allowances
claim for P&M is a welcoming measure. It
reflects the Government‘s commitment to help
businesses to weather the near-term economic
uncertainties. The reduction in income tax
payable eases cash flows for businesses.

 The benefit would have been greater if the
accelerated capital allowances claim applies to
P&M acquisitions made in more than one YA.

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