Computation of Industrial Building Allowance
Mr. Lee, the government lessee, built a factory
building for his toy-manufacturing business during his accounting year
ending on 30 September 2005. The cost of construction incurred in the
accounting year was $8,000,000. 95% of the building was used for
qualifying purposes. When the building completed on 15 September
2005, it was used as an industrial building.
Computation of IBA:
Year of assessment 2005/2006:
Cost of construction: $8,000,000
Less: Initial allowance: $8,000,000 * 20% =
Less: Annual allowance: $8,000,000 * 4% = $320,000.
Residue of expenditure c/f to 2006/2007 = $8,000,000
- $1,600,000 - $320,000 = $6,080,000.
From 2006/2007 onward, if the building
continues to be used an industrial building, an annual allowance of
$320,000 will be granted until the residue of expenditure becomes zero.
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