Tax and SARS knowledge base
Wear-and-tear allowance on company equipment
How does a company deduct wear-and-tear on business equipment?
Last reviewed:
Direct answer
A company may claim a wear-and-tear allowance under section 11(e) for qualifying machinery, plant, implements, utensils and articles used for trade, subject to the relevant requirements. SARS Interpretation Note 47 explains the allowance, qualifying assets, value and acceptable write-off periods. The company should use an asset register and tax calculation, not simply copy accounting depreciation into the ITR14.
Before claiming, identify the asset, cost or qualifying value, owner, date it was brought into use, business use, potential alternative allowance and the current SARS write-off guidance. Each claim should be traceable to reliable source documents.
What this means in practice
Book depreciation and tax wear-and-tear can differ. Financial statements often use a company's accounting useful life, residual value and depreciation policy. Tax treatment follows the statutory allowance and SARS guidance, so an amount posted to the profit-and-loss statement is not proof of the allowable tax deduction.
An asset register is the control that joins the invoice to the return. For each item or sensible asset group, record the supplier, invoice date, cost, VAT treatment, delivery date, date first used for trade, location, business purpose, allowance category, write-off period, calculation and disposal date. Keep changes and disposals in the same register.
The wording "used for trade" matters. Equipment bought late in the year but not yet installed or available for the business may need different treatment from equipment already in use. Similarly, an asset that is partly private or used by another entity needs a cautious, documented analysis.
Step-by-step
- Inventory the fixed assets.
Compare the asset register to purchase invoices, the general ledger and physical equipment. Investigate assets that appear in one record but not the others. Record separate components where that is necessary to reflect their actual nature.
- Confirm ownership and cost.
Retain supplier invoices, finance agreements and proof of payment. Check whether the recorded cost includes an amount treated differently for VAT or whether a related party supplied the asset. Do not use an estimate when source evidence can be obtained.
- Establish the first business-use date.
Keep installation records, commissioning certificates, delivery notes, user logs or other evidence. The purchase date is not always the same as the date the asset was brought into use.
- Identify the applicable allowance.
Review current SARS Interpretation Note 47 and determine whether section 11(e) is the relevant provision. Particular assets, industries or projects can be covered by special allowances. Do not stack allowances without confirming the legal basis.
- Prepare and reconcile the tax calculation.
Use the appropriate value and write-off period for the asset facts. Reconcile the total to the ITR14 tax computation and explain differences from book depreciation. Review additions, disposals and private-use adjustments.
- File evidence with the return workpapers.
Retain the current asset register, calculation, invoices and SARS reference used. Update it after filing, rather than recreating it only when SARS requests support.
Documents and records to keep
Keep purchase orders, invoices, delivery records, finance agreements, commissioning evidence, serial numbers, location records, asset register, tax calculation, general-ledger reconciliation, disposal documents and ITR14 workpapers. Retain any specialist analysis where a special asset allowance or mixed use is involved.
Important limits and exceptions
This guide is not a fixed allowance table. The suitable write-off period and value depend on the asset and facts. Do not infer a period from a similar-looking item, an accounting depreciation policy or an old spreadsheet. A building improvement, software arrangement, leased asset or industry-specific item may require another analysis.
The claim also remains subject to the broader tax-law requirements. Keep current SARS material and seek advice before using an unusual valuation, changing a method or claiming on a significant acquisition.
When to get tailored advice
Get advice where assets are financed, leased, imported, jointly used, acquired from a connected person, used partly outside trade, or potentially qualify for a special incentive. Advice is also useful before a large disposal, insurance recovery or business restructuring.
TaxProof can help build and reconcile an asset register. We cannot confirm a tax allowance without reviewing the asset facts and current law.