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Depreciation allowance - plant and machinery -
the old system Assets partly
used for the trade: Such assets are not pooled even after they became wholly used for trade.
An illustration showing how
depreciation allowances are computed
A trader bought a motor vehicle
for $280,000 on 1 June 2001. 50% of the vehicle's usage is for his trade.
On 1 July 2003, he sold it for $60,000. He finalized accounts on 31
March.
Year of
assessment 2001/2002:
Initial allowance: $280,000 * 60%
= $168,000 (50% allowable: $84,000)
Reducing
balance: $280,000 - $168,000 = $112,000
Annual allowance: $112,000 * 30% =
$33,600 (50% allowable: $16,800)
Reducing balance:
$112,000 - $33,600 = $78,400
Year of
assessment 2002/2003:
Annual allowance: $78,400 * 30% =
$23,520 (50% allowable: $11,760)
Reducing balance:
$78,400 - $23,520 = $54,800
Year of assessment 2003/2004:
Because sales proceeds $60,000 is
greater than the reducing balance $54,800, balancing charge (a claw back
of the excessive allowance) is assessable.
Balancing charge: $60,000 -
$54,800 = $5,200 (50% assessable: $2,600).
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