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Want to put cash back into your business? Find out which three company assets qualify for a scrapping allowance

by , 02 July 2013
SARS allows companies to claim a scrapping allowance on any business asset that has a useful life of less than ten years. In fact, you can also claim a scrapping allowance where you sell a company asset, lose the asset or if it's destroyed and the consideration you get for it is less than the net tax value. Read on to find out exactly when your company assets qualify for this allowance so you can put some money back into your business.

Do you have an office printer that's so old, it hardly even switches on? And you can't depreciate it anymore?

Or maybe your office delivery van was in an accident and has been totally written off?

That's great news!

You see, you can claim a scrapping allowance for these assets to save money for your business provided the consideration you get them is less than the net tax value.

According to the Practical Tax Loose Leaf Service, the net tax value of the asset is its cost to you (what you paid for it) less any wear and tear you've claimed on the asset. And the consideration may be the payout from your insurance company or the payment you get from someone who's buying the asset from you.

But before you claim a scrapping allowance, your company's assets must meet certain requirements.

Ensure you company assets meet these three requirements to qualify for a scrapping allowance

#1: You must be disposing of the asset. This means it's being sold, has been written off or destroyed, or is worn out.

Remember that 'worn out' doesn't necessarily mean the asset is completely useless. So, as long as you've decided it's so old you can't use it in your business anymore, it'll qualify.

#2: The asset must have qualified for a capital allowance. The capital allowances are:

  • Wear and tear deductions for the depreciation of the asset.
  • Deductions on the wear and tear of manufacturing assets, like machinery.
  • Deductions for assets of a small business corporation.

#3: You must have claimed one of these capital allowances on the asset. If so, you'll be allowed to claim the scrapping allowance.

And remember, SARS won't allow you to claim a scrapping allowance if you're closing your company and selling everything off, or have gone into liquidation and need to sell all your assets.

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