Capital Allowance & Charges

Capital Allowance
- tax "depreciation" for capital expenditure

Computation of Statutory Income
Adjusted income
Add: Balancing charge
Less: Capital Allowance
- Unabsorbed capital allowance b/f
- Current year capital allowance
- Balancing allowance
Statutory income

Expenditure Qualifying for Capital Allowance (QPE)
a) cost of plant & machinery
b) expenditure on alteration of existing building for installation of P&M
c) expenditure on preparing, cutting, tunneling or leveling land in order to prepare a site for installation of P&M (=< than 10% of total cost) - 10% rule. If >10% not qualify for CA

Qualifying expenditure for motor vehicle
- restricted to RM100,000 if:-
a) new
b) cost <= RM150,000
c) purchased on/after 28/10/2000
otherwise QPE restricted to RM50,000 or cost whichever lower

Notional allowance (NA)
- occur when asset not in used for the business in particular YA

Basis period for CA
- same as basis period for business
- if incurred before commencement date, deemed to be incurred on the date of commencement
- overlapping basis period - IA claimed in the earlier YA

Disposal
- sold, discarded, destroyed or ceases to be use for business purposes

Asset owned for < 2 years (Para 71)
- assets disposed off within 2 year (exact number of days) of acquisition
- clawback all the capital allowances claimed as Balancing Charge
- fire, obsolete model, faulty - no clawback

Balancing charge (BC)/Balancing Allowance (BA)
- BC = sales proceed > TWDV - to added to adjusted income
- Withdrawal of capital allowance previously claimed
- BA = TWDV > sales proceed - deduct against the adjusted income

Hire purchase assets
- AA&IA based on capital portion of installment paid in that basis period
- interest- eligible for tax deduction

Leased Assets
1) Operating lease : No CA, claim lease rental
2) Finance lease:
- Deemed sale : Claim CA based on capital portion of lease rental, interest eligible for deduction
- Not deemed sale : No CA, claim lease rental

Control transfer
Implications:-
Disposer : No BA or BC arising on the disposer
Acquirer : No IA, claim AA based on the original QE of the asset and up to TWDV c/f from disposer ignored purchase price

Control transfer vs 2 years claw back
- control transfer take precedence, claw back not applicable