[Question] Depreciation: Cutoff Machine

[SilverNodashi]

Hi all,

I have a quick question on depreciating a "cut off machine". Should it be listed as "Grinding machines : 6" a or "Power tools (hand-operated) : 5", from the Depreciation allowance table, found on the Wiki

And then, for clarification, since this item is less than R7000, do I depreciate it over 1 year, instead of 5 of 6 (depending on the answer above)?

Lastly, which method of depreciation is preferred, "Straight Line", "Declining Balance" or "Full Depreciation at Purchase"?

[Andromeda]

You depreciate it in terms of the company's accounting policy.

You write it off in year 1, as wear and tear, for tax purposes.

They are two separate issues. You are conflating an accounting concept with a tax entity capital allowance.

[SilverNodashi]

You depreciate it in terms of the company's accounting policy.

You write it off in year 1, as wear and tear, for tax purposes.

They are two separate issues. You are conflating an accounting concept with a tax entity capital allowance.

Ok, thanx. What I meant with the second question, is which option is more beneficial from a tax point of view?

[Andromeda]

You add depreciation back to profit and then deduct wear and tear, for tax purposes. (Depreciation is a disallowed expense.)

There are no choices - the tax authority determines the wear and tear allowance and then that is what you apply. In south Africa they are all expressed in years, therefore straight line, for entities that are not Small Business Corporations (SBC).

If the entity is a qualifying SBC, you may claim all qualifying plant and equipment acquired during the year, at once. In respect of other fixed assets, you may claim wear and tear 50% in year 1, 30% in year 2 and 20% in year 3.

In all cases, fixed assets up to R7,000 may be fully claimed in year 1. The R7,000 limit is reviewed every year.

[SilverNodashi]

You add depreciation back to profit and then deduct wear and tear, for tax purposes. (Depreciation is a disallowed expense.)

There are no choices - the tax authority determines the wear and tear allowance and then that is what you apply. In south Africa they are all expressed in years, therefore straight line, for entities that are not Small Business Corporations (SBC).

If the entity is a qualifying SBC, you may claim all qualifying plant and equipment acquired during the year, at once. In respect of other fixed assets, you may claim wear and tear 50% in year 1, 30% in year 2 and 20% in year 3.

In all cases, fixed assets up to R7,000 may be fully claimed in year 1. The R7,000 limit is reviewed every year.

Thank you.