Capital allowances. Depreciation, but the tax version.
Your accountant depreciates the new laptops over three years. IRAS ignores that number entirely. Depreciation is an accounting choice; what IRAS allows instead is a capital allowance — its own schedule for writing off qualifying assets against taxable profit. Most companies claim it. Fewer claim it well, and a surprising number don’t realise they’ve left it on the table.
In this article
Why depreciation is added back
In the tax computation, accounting depreciation is added back to profit and capital allowances are deducted in its place. Two companies with identical accounts can end up with different taxable profits depending on how well they claim. It’s also why the "adjusted profit" on your tax computation is never the same as the profit in your accounts — a point we walk through on our tax page.
What qualifies
Broadly, plant and machinery: equipment, computers and servers, office furniture, machinery, fixtures that do the work of the business rather than form part of the building. Commercial vehicles generally qualify; private cars generally don’t, which is one of the most expensive surprises for a director who bought an S-plate car "through the company". The building itself, land, and most structural works are excluded — they’re capital in a different sense.
Software counts. Purchased software and many IT costs qualify as plant. Subscriptions are usually just expenses. The line between the two matters for timing more than for total relief.
The write-off options
IRAS allows several ways to write an asset off: over its prescribed working life, over a short fixed period of a few years, or in full in the year of purchase for certain low-value or specified assets. The exact periods and the value thresholds are IRAS’s and get revised, so check the current rules before choosing. The choice is real: writing off fast helps a profitable company this year; spreading it can suit a company that expects to be more profitable later, or one whose allowances would otherwise just create unused losses.
Renovation is a different bucket
Renovating or refurbishing your premises usually doesn’t qualify as plant. Instead IRAS has a separate deduction for qualifying renovation and refurbishment costs, spread over a fixed period and subject to a cap. It excludes structural works and anything needing planning approval. If you’re fitting out an office or a shop, get the invoices split between what is plant (air-con units, fittings) and what is renovation (partitions, flooring) before the contractor bills you as one line. After the fact, that split is guesswork.
Where companies lose out
Three ways. First, assets bought personally by the director and never recorded in the company, so there’s nothing to claim. Second, no fixed-asset register, so nobody knows what was bought when, and the accountant claims nothing rather than claim wrongly. Third, claiming everything in one year and creating a loss the company can’t use. Capital allowances that aren’t needed this year can generally be carried forward or, in some cases, deferred — but only if someone is actually planning.
Bought equipment this year?
Send us the asset list — even a photo of the invoices. We’ll tell you what qualifies, which write-off suits your profit, and what to keep out of the company next time.
This article is general information, not legal, tax or financial advice. Thresholds, rates, penalties and filing rules are set by ACRA, IRAS, MOM and the relevant legislation and change over time; we have deliberately left the figures out. Please verify the current position or talk to us before making decisions. Morphrix Solutions Pte. Ltd. (formerly AG Solutions).