Finance Minister Bill Morneau, tabled the 2018 Fall Economic Statement on November 21, 2018. The most notable tax announcement is the Accelerated Investment Incentive for capital costs allowance (“CCA”) and full CCA write-offs for manufacturing and processing property and eligible clean energy property. In addition, the mineral exploration tax credit will be extended five more years, until March 31, 2024.
Accelerated Investment Incentive:
The Accelerated Investment Incentive will accelerate CCA for basically all types of assets that are already eligible for CCA. This will be achieved by two changes:
1) The CCA deduction for the first year in which an asset becomes available for use will be 1.5 times what would normally be allowed.
2) In addition, the half year rule will be temporarily suspended.
As a result, the CCA deduction for an asset in the year its acquired will be 3 times what is normally allowed. The CCA in subsequent years will be calculated normally.
The proposed Accelerated Investment Incentive will be in full effect for assets acquired after November 20, 2018 and that become available for use before 2028. The Accelerated Investment Incentive will not be available where the taxpayer or a non-arm’s length person previously owned the property, or where the property was transferred to the taxpayer as a tax deferred rollover.
Full Expensing of Manufacturing and Processing and Clean Energy Equipment
Currently, manufacturing and processing equipment (Class 53) is eligible for a 50% CCAdeduction, various types of clean energy equipment (in Classes 43.1 & 43.2) are eligible for 30% and 50% CCA respectively. Where assets in these classes are acquired after November 20, 2018 and before 2024, the cost of the assets will be eligible for a 100% CCA deduction. Thus, the half-year rule is effectively suspended. The accelerated CCA is only available if the property is available for use before 2028.
To read the Federal Government’s full announcement, please go to: https://budget.gc.ca/fes-eea/2018/docs/statement-enonce/toc-tdm-en.html.