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Do you own a company asset worth less than R7 000? Here's how to depreciate it

by , 09 July 2014
Not every asset in your company has to be a major purchase. All of those small pieces of equipment and furniture are company assets and, just like big machinery, they get older and depreciate.

But what you may not know is that assets that are worth less than R7 000 don't depreciate at the normal asset depreciation rate of 15% a year. At least, they don't when it comes to claiming a wear and tear allowance on that depreciation.

So here's how to depreciate your smaller assets and claim the wear and tear allowance correctly...

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You can write off a 'small' asset in the same year you bought it

Asset depreciation on 'small' assets (assets worth less than R7 000) happens in one go. Unlike bigger assets with a higher value, you don't claim the deducted depreciation each year.
So, if you buy a desk for R2 000, you can claim that amount back in your wear and tear allowance in the same year. 
The benefit of this is you can get to total cost of the asset back as a tax deduction. Essentially this means SARS let you have the asset for free. 
But just because an asset depreciates in full within a year in the eyes of SARS, doesn't mean it should in the eyes of your business.

You must use normal asset depreciation in your company's accounting

You must still calculate deprecation of that 'small' asset as normal in your company's books. You must keep doing this for the asset's entire lifespan (+/- six years).
This way you'll still be able to have a fair representation of the asset's value in your company. 
The Practical Tax Loose Leaf Service suggests you draw up a schedule that shows when each of your assets depreciates and by how much. Then simply use this schedule so you can account for the depreciation correctly.
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