Excavator Tax Benefits 2026 - Capital Allowance Guide Malaysia

2026 Excavator Tax Benefits

Construction companies buy excavators. The tax benefits are significant. Capital allowances reduce taxable income. Smart financing maximizes savings.

This guide explains excavator tax benefits. How capital allowances work. Financing options that preserve cash flow.

Excavator Prices 2026

New Excavator Prices

• Komatsu PC200: RM340,000 - RM380,000
• CAT 320: RM450,000 - RM520,000
• Hitachi ZX200: RM350,000 - RM400,000

Used Excavator Prices

• 5-year used: RM180,000 - RM220,000
• 8-year used: RM120,000 - RM150,000
• 10-year used: RM80,000 - RM110,000

Capital Allowance Explained

What is Capital Allowance?

Capital allowance is tax deduction for equipment depreciation. Instead of deducting full cost in Year 1, you deduct over several years.

Excavator Capital Allowance Rates

Initial Allowance (Year 1): 20% - 40% of equipment cost

Annual Allowance (Year 2 onwards): 10% - 20% of remaining value

Real Example: Komatsu PC200

Equipment cost: RM340,000

Year 1 (40% initial): RM136,000 tax deduction
Year 2 (20% annual): RM40,800 tax deduction
Year 3 (20% annual): RM32,640 tax deduction
Year 4 (20% annual): RM26,112 tax deduction
Year 5 (20% annual): RM20,890 tax deduction
Year 6 (20% annual): RM16,712 tax deduction
Year 7 (20% annual): RM13,370 tax deduction

Total deductions: RM286,524 over 7 years

Tax Savings at 24% corporate tax: RM68,765

Bank vs Alternative Financing

Bank Excavator Financing

• Interest rate: 4.6% - 6.0%
• Maximum loan: 90%
• Down payment: 10% - 20% (RM34,000 - RM68,000 on RM340,000 excavator)
• Age limit: 5 years maximum
• Processing: 2 - 4 weeks

Ing Heng Credit Excavator Financing

• Interest rate: Competitive rates
• Maximum loan: 100%
• Down payment: 0% (RM0 on RM340,000 excavator)
• Age limit: No limit
• Processing: 24 - 48 hours

Tax Benefit + Cash Flow Strategy

Scenario: RM340,000 Excavator Purchase

Option 1: Bank with 20% Down Payment

• Down payment cash: RM68,000
• Year 1 tax deduction: RM136,000
• Tax savings (24%): RM32,640
• Net cash outflow Year 1: RM35,360

Option 2: Ing Heng 0% Down Payment

• Down payment cash: RM0
• Year 1 tax deduction: RM136,000
• Tax savings (24%): RM32,640
• Net cash outflow Year 1: Negative (tax savings exceed payments)

Winner: 0% down payment preserves RM68,000 cash flow while keeping full tax benefit.

Used Excavator Tax Benefits

Used excavators also qualify for capital allowances. Lower purchase price = smaller tax deductions, but significant upfront savings.

Example: Used Komatsu (RM150,000)

• Year 1 (40%): RM60,000 deduction
• Tax savings (24%): RM14,400
• Equipment savings vs new: RM190,000

Banks reject used over 5 years. We finance any age based on condition.

Excavator Financing Scenarios

New Excavator for Growing Contractor

Equipment: Komatsu PC200 (RM340,000)

Bank: RM34,000 - RM68,000 down payment
Ing Heng: 0% down, preserve cash for operations

Used Excavator for Budget-Conscious

Equipment: 8-year used (RM130,000)

Bank: Rejected (age limit)
Ing Heng: Approved 100% financing

Multiple Excavators for Fleet

Equipment: 3 excavators (RM720,000 total)

Bank: RM72,000 - RM144,000 down payment
Ing Heng: 0% down, full RM144,000 preserved for fuel and maintenance

2026 Tax Planning Tips

• Time excavator purchases before Year End for maximum allowance
• Consider used equipment for cash savings
• 0% down payment maximizes cash flow
• Combine capital allowance with interest deduction
• Keep proper documentation for LHDN