A common tax mistake is treating every payment as an immediate expense. Some costs create enduring assets and may need depreciation; others are day-to-day revenue expenses. Classification affects profit, tax, audit and lender reporting.
| Type | Typical treatment control | Examples |
|---|---|---|
| Revenue expense | Consumed in running the business and generally claimed in the year, subject to rules. | Rent, utilities, routine repairs, professional fees. |
| Capital expense | Creates/acquires an asset or enduring benefit; depreciation may apply. | Laptop, machinery, furniture, camera, major fit-out. |
| Mixed cases | Need accounting/tax note based on facts. | Software licence, renovation, major repairs, website build. |
Official Section 32 and depreciation-rate material prescribe depreciation for eligible tangible and intangible assets. Classification should therefore happen before the return is prepared, not after.
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It depends on facts and tax treatment; many such assets may require depreciation instead of full immediate deduction.
It affects taxable profit, depreciation, audit reporting and future sale/scrap treatment.
Yes. It supports depreciation and tax audit questions.