SOUTH AFRICAN REVENUE SERVICE
MEDIA RELEASE NUMBER 3 OF 1996
19 JUNE 1996
INCOME TAX: ACCELERATED WEAR AND TEAR ALLOWANCE
In terms of the present provisions of the Income Tax Act, 1962, where -
- (a) any plant or machinery has been brought into use by a taxpayer for the first time for the purposes of his trade (other than mining or farming) and is used by him directly in a process of manufacture or a process of a similar nature, the taxpayer is entitled to a wear and tear allowance calculated at 20 per cent of the cost price of the plant and machinery on a straight-line basis over 5 years. A similar allowance is also granted to a lessor of plant and machinery where it is used by the lessee directly in a process of manufacture or a process of a similar nature; or
(b) any building has been erected by a taxpayer, or any improvements were effected to a building and the building was used by the taxpayer wholly or mainly for the purpose of carrying on therein during the course of his trade (other than mining or farming) a process of manufacture or a process of a similar nature, the taxpayer is entitled to a wear and tear allowance calculated at 5 per cent of the cost of the building or improvements (less certain recoupments) on a straight-line basis over 20 years. Furthermore, an allowance of a similar nature is granted to a lessor of a building where the building is wholly or mainly used by the tenant thereof for the purpose of carrying on therein a process of manufacture or a process of a similar nature.
On 14 June 1996 the Minister of Finance proposed a Macro-Economic Strategy to promote growth, employment and redistribution. One of the key elements of the economic package outlined by the Minister, encompasses certain tax incentives to stimulate growth. He announced that for a limited period the abovementioned tax allowances will be granted on an accelerated basis, namely -
It is envisaged that the Minister of Finance will recommend to Parliament, later during this year that appropriate legislation be introduced to give effect to the aforementioned proposals.
- (i) where any plant or machinery is acquired and brought into use by a taxpayer during the period 1 July 1996 to 30 September 1999 and will be used by the taxpayer for the purposes contemplated in paragraph (a) above, the cost of such machinery or plant will be written off at 33 1/3 per cent per annum on a straight-line basis over 3 years; and
(ii) where the erection of any building, or any improvements to a building, commences during the period 1 July 1996 to 30 September 1999 and the building or improvements are brought into use before 31 March 2000 for the purpose contemplated in paragraph (b) above, the cost of such building or improvements will be written off at 10 per cent per annum on a straight-line basis over 10 years.
The Commissioner for Inland Revenue
P O Box 402
Mr J J Louw
Tel: (012) 315-5388
Fax: (012) 325-6006
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