Tax and SARS knowledge base
Accelerated depreciation for a small business corporation
What accelerated depreciation is available to a small business corporation?
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Direct answer
A company should claim a section 12E allowance only after applying the current section 12E text and SARS Interpretation Note 9, Issue 7 to the company and asset facts. SARS's current source-code guidance identifies section 12E plant and machinery as a reporting category, but it does not establish a rate or entitlement on its own. There is no single accelerated depreciation rate that fits every company or asset.
The record must show more than an invoice. It should show what was acquired, when it was brought into use, the business use, the cost and whether the asset has been sold, scrapped or used privately.
What this means in practice
An accounting depreciation charge and a tax allowance are not automatically the same thing. The accounts may depreciate an asset according to useful life, while the tax computation must apply the current tax rule that is actually available. Do not copy the accounting depreciation figure into the company return as an allowance without a separate review.
Begin with two connected schedules. The first is a company-status schedule containing shareholders, ownership interests, connected entities and the other facts relevant to small business corporation status. The second is an asset schedule containing each asset's description, invoice, supplier, cost, delivery date, date brought into use, business purpose and any disposal details.
This approach protects against two common errors. The first is applying a favourable allowance where the company does not meet the current status requirements. The second is applying the correct kind of allowance to the wrong asset, wrong period or a cost that includes non-qualifying items.
Step-by-step
- Confirm the legal entity and year of assessment.
Start with the company registration documents, shareholder register and financial year. The review must use the company facts for the year being filed, not the facts at incorporation or a prior year.
- Build the ownership and connected-entity record.
Identify shareholders, their ownership interests and relevant connected entities. Preserve signed registers and agreements. Where ownership changed during the year, record the dates and supporting documents.
- Build the fixed-asset schedule.
List each proposed asset separately. Include the invoice reference, cost excluding items that need separate treatment, delivery date, date first used in trade, location and business purpose. Link each line to the general ledger and invoice image.
- Identify the applicable current allowance provision.
Use the current section 12E text, SARS Interpretation Note 9, Issue 7, and professional advice where necessary to test SBC status and asset eligibility. Do not rely on an old depreciation table or a supplier's statement that an asset is "tax deductible".
- Reconcile accounting and tax treatment.
Keep the accounting depreciation schedule and tax allowance schedule separate, then reconcile them in the tax computation. Record additions, disposals, private use and corrections. This makes the ITR14 answer traceable.
- Retain the return support file.
Save the status review, asset schedule, invoices, calculations, ITR14 copy and assessment together. Update the schedule when an asset is disposed of or its use changes.
Documents and records to keep
Keep the company registration documents, shareholder register, ownership-change agreements, group chart, annual financial statements and current tax computation. For each asset, retain the invoice, supplier contract, finance agreement, proof of delivery, commissioning record, fixed-asset register and disposal evidence.
Where an asset is partly used privately or is moved between activities, maintain a note of the dates and factual use. Good contemporaneous evidence is far stronger than trying to reconstruct asset use several years later.
Important limits and exceptions
This guide does not provide a rate, deduction amount or asset eligibility conclusion. Those outcomes must be tested under the current section 12E text and Interpretation Note 9 against the applicable year and facts. A company does not become an SBC merely because it calls itself small, has a modest turnover or has bought qualifying-looking equipment.
Land, buildings, software, vehicles, financed assets, leased assets and mixed-use assets can have different rules. A disposal, recoupment or change in use can also affect later tax treatment. Do not use this guide as a substitute for an asset-by-asset calculation.
When to get tailored advice
Get tailored advice before filing where ownership is complex, the company belongs to a group, a large asset purchase is involved, assets are partly private, or a disposal has occurred. Review is also sensible where a prior return used accelerated allowances and the current file cannot show why.
TaxProof can help organise asset evidence and reconcile the tax schedule to ITR14. We cannot determine an accelerated allowance without the current law, company-status facts and asset-specific evidence.