ARE YOU ENTITLED TO CLAIM CAPITAL ALLOWANCE FOR RENOVATION COSTS?

Prior to 2009, expenses incurred on renovations or refurbishments of business premises are not allowed as a deduction and do not qualify for capital allowances.

Under the Second Stimulus Package, the Minister has made the rule "Income Tax (Renovation or Refurbishment Expenditure) Rules 2010 [P.U.(A) 20/2010]", wherein are specified expenses incurred on the renovation and refurbishment of business premises between 10 March 2009 and 31 December 2010 be given Accelerated Capital Allowances (ACA) at the rate of 50% and qualifying expenditure for ACA purposes is capped at RM100,000. These rules are effective from years of assessment 2009 to 2011.

Types of qualifying expenditure allow to claim ACA are as follows:
1) lighting;
2) gas system;
3) water system;
4) kitchen fittings;
5) sanitary fittings;
6) door, gate, window, grill and roller shutter;
7) fixed partitions;
8) flooring;
9) wall covering;
10) false ceiling and cornices;
11) ornamental features or decorations excluding fine art;
12) canopy or awning;
13) fitting room or changing room;
14) children play area; and
15) recreational room for employee;

According to the Guidelines on 2009 Mini Budget, the following expenses are not allowed for renovation or refurbishment allowances;

• 
  
   design fee or service fee for mechanical and electrical engineering;
• 
  
  antiques; or
• 
  
  fine art items including paintings, prints, graphics, mosaic art, sculptures and porcelain art.

And, the following examples of items that are not renovations but are assets qualifying for capital allowances:

• 
  
  Mirrors fixed in business premises such as hair salons, beauty centre and hotel;
• 
  
  Aquarium used for business purposes; or
• 
  
  Curtains and carpets for business purpose.