In its Fall Economic Statement, the Government of Canada has announced a bit of a tax break for Canadian business that also includes Alberta business, in that it will allow you to triple the capital cost allowance claim in the year that you make new capital purchases:
Building on Canada’s competitive corporate tax system and Canada’s other key strengths, the Government proposes to introduce an Accelerated Investment Incentive to support all businesses that make capital investments. Under the Accelerated Investment Incentive, capital investments will generally be eligible for a first-year deduction for depreciation equal to up to three times the amount that would otherwise apply in the year an asset is put in use. Tripling the current first-year rate will allow businesses to recover the initial cost of their investment more quickly—reducing risk and providing businesses in Canada with a true incentive to make capital investments. The Accelerated Investment Incentive will apply to all tangible capital assets, including long-lived investments like buildings. The Accelerated Investment Incentive will also apply to intangible capital assets, such as patents and other intellectual property. This treatment is different from that of the United States, where temporary Bonus Depreciation is generally limited to assets with a normal useful life of 20 years or less, and excludes assets such as patents.
Immediate Expensing and the Accelerated Investment Incentive Will Allow
Businesses to Recover Investment Costs Sooner
| Normal | With Proposed Measures (maximum 100%) | |
|---|---|---|
| Immediate Expensing | ||
| Manufacturing and processing machinery and equipment | 25% | 100% |
| Clean energy equipment | 25% | 100% |
| Accelerated Investment Incentive | ||
| Computer software | 50% | 100% |
| Computers | 27.50% | 82.50% |
| Trucks and tractors for hauling freight | 20% | 60% |
| Motor vehicles | 15% | 45% |
| Earth-moving equipment | 15% | 45% |
| Data network infrastructure equipment | 15% | 45% |
| Aircraft | 12.50% | 37.50% |
| Office equipment | 10% | 30% |
| Fibre-optic cables | 6% | 18% |
| Buildings used in manufacturing and processing | 5% | 15% |
| Other non-residential buildings | 3% | 9% |
| Goodwill1 | 2.50% | 7.50% |
| Other2 | Variable | Up to 3x normal rate |
1Goodwill is an intangible business asset that is linked to the established reputation of a business. In practice, goodwill is the difference between the price paid to acquire a business and the value of the net assets (e.g., buildings, equipment) acquired during the sale.
2 The category “other” includes all other capital assets, including intangible capital assets, that are not presented in this table.
It is expected that accelerated depreciation for investments in fibre connectivity, wireless service and broadband infrastructure will particularly benefit more remote communities, while helping to strengthen Canada’s economy more generally. The Government has had positive discussions with Canada’s telecommunications sector with regard to investment incentives and will work with the sector to ensure that the proposed incentives result in accelerated deployment of next-generation digital technology and rural broadband/rural wireless services across the country.
The Accelerated Investment Incentive will apply to qualifying assets acquired after November 20, 2018. It will be gradually phased out starting in 2024, and no longer in effect for investments put in use after 2027.
