What Are Capital Allowances Worth?

The amount of plant and machinery in a building will vary depending on a number of factors. However as a guide, the cost of constructing a high quality air-conditioned office building may be made up of as much as 25% plant and machinery, whilst this could still be up to 20% on a less sophisticated building. Even on an industrial building, plant and machinery could represent over 10% of its construction cost.

When applied to purchased buildings, which includes the cost of land (on which allowances are not available) plant and machinery could account for as much as 20% of the purchase price of an air-conditioned office building, 15% of a basic office building and up to 8% of an industrial building.

The cost of plant and machinery, on which capital allowances are available, may be written-down against tax at varying write-off periods depending upon the type of asset, in accordance with Practice Notes 15, 19 and 39 of the Income Tax Act No.58 of 1962, which can equate to writing down allowances of between 10% and 20% a year on a straight line basis.

For further information please see our Case Studies.

Industrial Buildings Allowances (IBA's) are currently available on a straight line basis over a 20 year period of a qualifying building. Thus a building first coming into a qualifying industrial use will currently be written-down at 5% per annum over its industrial life.