Capital allowances: tax depreciation you choose the pace of

Buy a S$3,000 laptop and it never appears as a deduction — it is capital, and capital spending earns capital allowances instead: tax's standardised replacement for whatever depreciation policy your accounts use. The rules are mechanical, but they contain one of the few genuine timing choices in the whole computation.

The two tracks under s19A

Per IRAS, qualifying plant and machinery — equipment, computers, furniture, machinery, but never private (S-plate) cars — is written off under s19A on one of two tracks:

1. Three-year write-off — one-third of cost per YA, available for virtually all plant and machinery. The workhorse election for most SMEs.
2. One-year (100%) write-off — immediate full claim, available for:
   • computers and prescribed automation equipment, at any cost;
   • low-value assets costing not more than S$5,000 each, subject to an aggregate cap of S$30,000 of such claims per YA — the excess simply joins the three-year track.

Elections are made asset by asset and are irrevocable for that asset once made. (The older s19 working-life schedules still exist as a fallback but rarely beat the s19A tracks for a small company.)

Books versus tax — same asset, two lives

Your accounts might depreciate that laptop over three years straight-line; the computation adds that depreciation back and claims the allowance instead — perhaps 100% in year one. The asset's accounting value and tax value then differ for a while, which is normal, expected, and precisely why the fixed-asset schedule matters: it tracks cost, dates, elections and claims per asset, and it is the first thing IRAS asks for when reviewing allowance claims.

The timing play

Because claims are elective, a company in a loss year faces a real choice: claiming allowances deepens the unabsorbed balance — which then rides on the shareholding and same-trade tests — while deferring parks the claim, intact, for a profitable year where it saves tax immediately. For a pre-profit startup buying equipment ahead of revenue, deferral is frequently the better answer, and it is squarely legitimate planning. The decision belongs in the annual computation conversation, not on autopilot.

Practical rules of thumb

• Default the small stuff to one year — laptops, monitors, phones under S$5,000 each, inside the S$30,000 aggregate; the cash-flow benefit is immediate and the record-keeping trivial.
• Elect three years for big-ticket equipment in profitable years — smoothing claims across the exemption-sheltered and fully-taxed years can beat a one-shot claim.
• Check the boundary items: renovation is usually s14N deduction territory, not allowances; software and websites have their own treatments; and anything mixed-use invites apportionment.
• Keep the schedule current — an asset register maintained as you buy costs minutes; reconstructing five years of purchases at a query costs real money.