The small-value asset allowance lets a business write off cheap equipment in full in the year it is bought, instead of claiming it over several years. Today the limit is RM2,000 per asset. Budget 2027, tabled on 9 October 2026, raises it to RM3,000 per asset from year of assessment 2027, and lifts the yearly cap for companies outside the MSME definition from RM20,000 to RM30,000. MSME companies have no cap.

The change matters because RM2,000 to RM3,000 is where most business laptops, phones and point-of-sale terminals sit. Under the old limit they were claimed over years. Under the new one they are claimed at once.

How the allowance works

The rule is paragraph 19A of Schedule 3 to the Income Tax Act, explained in LHDN Public Ruling No. 4/2026. In place of the normal initial and annual allowances, an asset that costs no more than the limit gets a 100% special allowance in the year of assessment the cost is incurred.

Item Now (to YA 2026) From YA 2027 (Budget 2027 proposal)
Limit per asset RM2,000 RM3,000
Allowance 100% in year one 100% in year one
Yearly cap, non-MSME companies RM20,000 RM30,000
Yearly cap, MSME companies None None

Only an MSME company is uncapped. It must be resident and incorporated in Malaysia, with paid-up ordinary share capital of RM2.5 million or less, gross business income of RM50 million or less, and ownership conditions that exclude companies controlled by larger groups. These are the same tests as the 14% MSME tax rate.

Other businesses are capped. LHDN’s Public Ruling No. 4/2026 applies the RM20,000 yearly cap to non-MSME companies and LLPs, and the exemption from the cap in paragraph 19A(3) of Schedule 3 is written for MSME companies only. Budget 2027 proposes raising the cap to RM30,000 for companies other than MSMEs. It does not say whether the LLP cap rises too, so assume RM20,000 for an LLP until the Finance Bill says otherwise. Sole proprietors and partnerships are not named in the ruling’s examples, so ask your tax agent which limit applies to you.

The increase is a proposal until the Finance Bill passes. The RM2,000 limit is what applies to purchases in your YA 2026 basis period.

What counts as a small-value asset

Any asset that would normally qualify for capital allowances, used in the business, costing no more than the limit. The test is per asset, not per invoice. LHDN excludes two kinds of purchase:

  • Assets bought on hire purchase. These go through normal capital allowances.
  • Assets expected to last two years or less, such as crockery. These are dealt with on a replacement basis instead.
Asset Typical cost Under RM2,000 rule Under RM3,000 rule
Business laptop RM2,200 to RM3,000 Normal rates 100% write-off
Smartphone for staff RM1,500 to RM2,800 Depends on model 100% write-off
Monitor RM600 to RM1,200 100% write-off 100% write-off
POS terminal or tablet with stand RM1,500 to RM2,500 Depends on model 100% write-off
Router, switch, printer, barcode scanner RM200 to RM1,500 100% write-off 100% write-off
Office desk or chair RM300 to RM1,500 100% write-off 100% write-off

Two points catch people out:

  • How items are grouped matters. LHDN’s own worked example treats a set of chairs and a set of tables as single assets, each valued as a set. If a set costs more than the limit, it may not qualify even though each piece is cheap. Ask your tax agent how to group a large order.
  • Websites are not clearly covered. The ruling’s examples are all physical equipment, and custom software has its own capital allowance rules. Our website tax deduction guide covers those.

Assets over the limit are not lost. They go through the normal capital allowance route, and for ICT equipment and software that means the Accelerated Capital Allowance, which Budget 2027 extended to 31 December 2030.

Worked example: equipping a five-person team

This is an illustration. It assumes a Sdn Bhd that qualifies as an MSME, replaces its team’s equipment in its YA 2027 basis period, has every item qualify for capital allowances, and has enough profit taxed at 14% to use the allowances.

Purchase Qty Unit cost Total RM2,000 rule RM3,000 rule
Laptops 5 RM2,800 RM14,000 ICT allowance RM14,000 at once
Monitors 5 RM900 RM4,500 RM4,500 at once RM4,500 at once
Phones 2 RM2,400 RM4,800 ICT allowance RM4,800 at once
POS tablet and stand 1 RM1,900 RM1,900 RM1,900 at once RM1,900 at once
Total RM25,200 RM17,680 in year one RM25,200 in year one

Under the RM3,000 rule the whole RM25,200 is claimed in YA 2027. At the new 14% MSME rate that is RM3,528 of tax saved in the first year.

Under the RM2,000 rule the laptops and phones are not lost. They go through the ICT capital allowance, which claims 60% in year one. That is RM11,280 of the RM18,800, plus RM6,400 of small assets written off at once, so RM17,680 in year one. The RM3,000 rule brings forward the other RM7,520, which is about RM1,050 of tax at 14%. The total saving is the same in the end. The difference is cash in the first year.

A non-MSME company doing the same purchase would stay within the RM30,000 cap. A larger refresh would need the excess to go through normal rates.

When to buy

The limit that applies is the one in force for the year of assessment in which you incur the cost. For a company with a December year end, the basis period for YA 2027 runs from 1 January to 31 December 2027.

  • Assets under RM2,000. No reason to wait. They are written off in full under either rule.
  • Assets between RM2,001 and RM3,000. If you can, buy them in your YA 2027 basis period, once the Finance Bill has passed. A RM2,800 laptop bought in December 2026 goes through the ICT allowance. The same laptop bought in January 2027 is written off at once.
  • Assets over RM3,000. Timing does not matter for this rule. ICT equipment still gets the Accelerated Capital Allowance, which Budget 2027 proposed extending to 2030.

Do not delay a purchase the business needs for a tax timing difference worth a few hundred ringgit. The rule rewards buying the right equipment in the right year, not holding off.

What about a website?

Do not count on this allowance for a website. LHDN’s ruling does not mention websites or software, and a custom website is normally claimed under the customised software rules or the ACA instead. Those clear the cost over two to three years. Our website cost guide covers what a build costs.

If you are choosing between a template site and a custom build, the allowance should not decide it. Our web design service quotes so the capital and running costs are already separated for your tax agent.

For the full list of Budget 2027 measures, see our Budget 2027 guide for SMEs.

Frequently asked questions

Is the RM3,000 limit already in force?

No. It was announced in Budget 2027 on 9 October 2026 and applies from YA 2027 once the Finance Bill passes. The RM2,000 limit applies to YA 2026.

Do I have to use the small-value asset allowance?

No. It is an election. If you use the special rate in your tax computation you are treated as having elected it. Your tax agent may prefer normal rates in a loss year, since unused allowances carry forward either way.

Is there a cap for SMEs?

Not for MSME companies, which can claim the allowance on every qualifying asset. Companies outside the MSME definition are capped at RM20,000 a year, which Budget 2027 proposes raising to RM30,000. LLPs are capped at RM20,000 under the current ruling, and the proposal does not say whether that changes.

Does a software subscription count?

No. A subscription is a revenue expense, deducted in full anyway. The allowance is for equipment you own and use in the business.

Can a sole proprietor claim it?

Generally yes, for qualifying equipment used in the business. The uncapped treatment in paragraph 19A(3) is only for MSME companies, so expect a yearly limit to apply. Confirm which limit with your tax agent, since LHDN’s ruling does not give a sole proprietor example.

Sources: Ministry of Finance, Budget 2027 speech and tax measures, Appendix 12; LHDN, Public Ruling No. 4/2026, Special Allowances for Small Value Assets. Checked 18 October 2026.