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Thread: Additions to fixed assets

  1. #11
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    To all the above users:

    ...What you do for Financial Accounting purposes and what you do for Taxation purposes are two different things.

    The tax value of an asset is recognized when it is or exceeds R7000.00
    The value of an asset for financial accounting purposes may be R6999.00 or less or more (As long as it meets the definition and recognition criteria of an asset in terms of the relevant International Accounting Standard.)

    Wear-and-tear rates(SARS) and Depreciation(Your business's accounting policy) are rarely exactly the same rate. EXAMPLE: In most cases a business will provide for depreciation over 5 years on a particular asset(thus 20% of cost price of asset in year one) While SARS will let you deduct the full amount of the asset in the year of purchase for tax purposes (thus 100% of cost of asset in year one)

    The calculations in your tax return and your income statement won't always agree for the above reason and this is normal. The tax man does not determine what you as an entity classifies as an asset and what is not, Accounting Standards do.

    Differences between accounting treatment and taxation treatment of transactions are usually reflected in you financial record as either a "Deferred tax asset" or "Deferred tax liability" (Tax payable per income statement vs. Tax payable per tax Return)

    If you have any further doubts on the above matter, please reply :]

  2. #12
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    iessa, Yes. Since the items are unrelated to each other, you would be able to claim a wear & tear allowance for their full value in the first year for each separate item.
    So in you example you would be able to claim a 20*R2000 = R24 000 S11(e) capital allowance in the year of purchase, because the items are unrelated (intended to be separate).

    CLIVE-TRIANGLE is spot on with his advice. When you have an excel fixed asset register (as many small businesses do) it is a good idea to incorporate the tax values, and capital allowances already claimed on the assets into that register.
    Such a combined fixed and tax asset register becomes very handy when doing your financials (calculating the deferred tax asset/liability), tax (keeps record of your claimed and claimable capital allowances).
    It is also very useful when you dispose of assets, either to calculate the S8(a) recoupment or possible CGT.

  3. Thank given for this post:

    Dave A (18-Jun-13), iessa (18-Jun-13)

  4. #13
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    Thanks Mynhardt! I contacted a tax advisor and that is the same as what was advised by him.

  5. #14
    Platinum Member AmithS's Avatar
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    Not taking any of the above into the mix...

    Is there a tax benefit if you expense vs. capitalising...

    Would it not add up to the same over a few years if you would expense vs. capitalise...

  6. #15
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    From a tax perspective, no additional monetary gain over time, the benefits of writing it off immediately in my opinion:

    1. Immediate tax benefit realised
    2. Not having to keep a track of a small item over the tax period from a fiscal point of view (should always track from a controls point of view).
    3. Time value of money
    4. Risk of legislative changes disallowing you from taking the benefit in year 1

  7. #16
    Platinum Member AmithS's Avatar
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    Quote Originally Posted by iessa View Post
    From a tax perspective, no additional monetary gain over time, the benefits of writing it off immediately in my opinion:

    1. Immediate tax benefit realised
    2. Not having to keep a track of a small item over the tax period from a fiscal point of view (should always track from a controls point of view).
    3. Time value of money
    4. Risk of legislative changes disallowing you from taking the benefit in year 1
    Thanks for the info iessa

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