On February 4, 2022, the Department of Finance released draft legislation intended to enact numerous measures previously announced in the 2021 Federal Budget. This draft legislation is open to public comment at this stage and is not yet enacted.
The rules allowing immediate deductibility of eligible capital asset additions are of particular note. Those rules will apply to purchases made after the effective date of April 19, 2021 which are available for use before Jan 1, 2024.
Canadian-controlled private businesses will be able to deduct in the year of purchase the full cost of selected assets that would normally be deducted over multiple years.
The $1.5M limit is for each tax year and must be shared between “associated” corporations, and will apply to most capital assets (excluding buildings and some intangibles and assets acquired from non-arm’s length parties).
Additionally, they announced that individuals and qualified partnerships would also qualify for the immediate deduction for similar assets available for use between January 1, 2022 and December 31, 2024; the same $1.5M limit is in place, and is subject to similar sharing rules.
Once the legislation has been enacted, the new rules can be used to increase deductions for qualifying taxpayers. For tax returns already filed that may be able to qualify for additional tax savings, amendments to those returns would be possible as well.
Further reading:
Read the Department of Finance’s full statement here.
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