Federal government announces changes to allow businesses to more quickly recover costs of capital assets

If your business recently made or is considering making new investments into capital assets, such as equipment, buildings or vehicles, then you might want to take a closer look at Canada’s new accelerate capital cost allowance incentives.

In November 2018, the federal government announced changes to how businesses will calculate the capital cost allowance on most capital assets purchased and put to use after November 20, 2018, and before 2028. The rules will phase out between 2024 and 2028.

The new calculation will generally allow businesses to claim three times the capital cost allowance in the first year purchase. For example, previously a business could claim 15% of the cost of automotive equipment as a deduction against income in the year of purchase, but under the new rules, this amount is increased to 45%.

The new rules apply to the purchase of tangible capital assets (equipment, buildings, vehicles, computers, etc.) and intangible capital assets (goodwill, patents, etc.).

For businesses in the manufacturing and processing industries, the increase is even more substantial. These businesses can claim 100% of the cost of equipment used in manufacturing and processing in the year purchased.

Businesses investing in clean energy equipment will also be entitled to claim 100% of the cost of the equipment as deduction in the year purchased.

For more information on the update, please see the fall economic update.

If your business needs help understanding the new capital cost allowance changes or you want to learn more, contact Apex Accounting, Chartered Professional Accountants, a call at 250-426-1976.