Immediate Expensing of Capital Asset Purchases
With the passing of Bill C-30, which enacted many measures that were previously announced in Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, the Federal government now allows immediate expensing 100% of many capital asset purchases.
The full cost of “eligible property” acquired by a Canadian-controlled private corporation (CCPC) on or after April 19, 2021 can be deducted, provided the property becomes available for use before January 1, 2024. Up to $1.5 million per taxation year is available for sharing among each associated group of CCPCs, with the limit being prorated for shorter taxation years. No carry-forward of excess capacity would be allowed.
Eligible Property
Eligible property includes capital property that is subject to the capital cost allowance (CCA) rules, other than property included in
CCA classes 1 to 6, 14.1, 17, 47, 49 and 51. The excluded classes are generally those that have long lives, such as buildings, fences, and goodwill.
Interactions of the Immediate Expensing with Other Provisions
Where capital costs of eligible property exceed $1.5 million in a year, the taxpayer can decide which assets would be deducted in full, with the remainder subject to the normal CCA rules.
Other enhanced deductions already available, such as the full expensing for manufacturing and processing machinery, would not reduce the maximum amount available ($1.5 million).
Restrictions
Generally, property acquired from a related person, or which was transferred to the taxpayer on a tax-deferred “rollover” basis, is not eligible.
Also, there are several other rules that limit CCA claims that would continue to apply, such as limits to claims on rental losses. For assistance, please contact your Accountant.
