Faster Deduction Available for Business Assets

Ken Goodridge, MBA, CPA, CMABlog, Consulting, Tax, Tax Credit

There was great news for businesses in the federal government’s Fall Economic Statement.  The government announced the “Accelerated Investment Incentive”, a proposal that makes changes to the capital cost allowance system in order to stimulate capital investment.

  • The proposed changes will result in quicker expensing of business capital assets
  • More amortization leads to less tax for businesses
  • Increased purchases of capital assets projected to boost the economy

In general terms, the Accelerated Investment Initiative will provide for increased capital cost allowance (CCA) in the first year that the asset is purchased and put into use.

Taxpayers will be entitled to claim a 100% deduction for manufacturing and processing equipment in the year it is put to use, instead of 25% in the first year and 50% per year thereafter on a declining balance basis.

Taxpayers who purchase specified clean energy equipment will also be entitled to deduct the entire cost in the first year.

The first year deduction on other asset purchases, such as buildings, vehicles, patents, and equipment, will be three times the amount currently deductible.  This will be accomplished by eliminating the half-year rule and allowing a deduction equal to one and a half times the current CCA rate.

As an example, if a taxpayer acquires furniture, fixtures or equipment with a 20% CCA rate, the deduction in the first year will be 30% of the cost of the asset, rather than the 10% currently available.

A similar example is if a taxpayer acquires a motor vehicle with a 30% CCA rate, the deduction in the first year will be 45% rather than the 15% currently available.

These new rules will be available for eligible property that is acquired after November 20, 2018, and become available for use before 2028.  There will be a phase-out period from 2024 to 2027.  A taxpayer will only be able to claim the accelerated deduction in the year that the asset becomes available for use.

If you would like further information or clarification, please contact our Tax Department:  Garry Chan 204-977-3520 gchan@lazergrant.ca  or Ken Goodridge 204-957-8205 kgoodridge@lazergrant.ca .