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sir is it necessary to do short life election? is it advantageous than not doing election? I did not understand in book in what case it is beneficial.
”if there is expenditure in excess of maximum 500,000 of expenditure eligible for AIA, it will be advantageous fr the AIA to be allocated against the main pool expenditure rather than a short life asset and for the short life election to be made”The reason for making the de-pooling election in relation to a short asset is the knowledge that when the asset is sold its sale proceeds will be significantly lower than its tax wdv, thus giving rise to a balancing allowance. This will allow all the available allowances to be claimed within the lifetime of ownership of the asset.
If AIA is available when the asset is purchased then there is no point in making the election as the asset’s tax wdv will immediately be zero so that when sold any sale proceeds will give rise to a balancing charge. The taxpayer does not want a balancing charge as that is added to the profit of the taxpayer for tax purposes.
The election would only be worthwhile therefore, as the note says, when total expenditure exceeds the AIA limit (currently 500,000), so allocate the AIA to the expenditure not eligible for the election leaving the WDA to apply to the short life assets which when sold will then attract a balancing allowance.
If WDA were applied to pool expenditure then when those assets are sold no balancing allowance is available and the WDA is simply continued on the remaining tax wdv
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