2018 Federal Fall Economic Update

Are you needing to purchase equipment for your business? Now would be the time! On November 21, 2018, the Minister of Finance presented the Federal Government’s 2018 Fall Economic Statement. In the statement, the Government announced measures to encourage capital investments across all economic sectors.

One of the proposed measures is called the Accelerated Investment Incentive which will allow businesses in Canada to deduct the costs of their capital investments more quickly.

Under the proposed measure, capital investments purchased after November 20, 2018  will increase  the capital cost allowance rate by one and one-half times for the first year on the investment of qualifying assets. Capital investments made prior to November 20, 2018 will remain subject to the half year rule. The Accelerated Investment Incentive program will be gradually phased out over a three year period starting in 2024 and eliminated for investments after 2027.

To illustrate the benefits of the program, consider a company that purchased equipment with a normal CCA rate of 20% at different times in the 2018 year:

Equipment purchased before November 20, 2018 would be subject to the half year rule, meaning that the company would be eligible to deduct up to 10% of the purchase price in the first year.

Equipment purchased after November 20, 2018, under the Accelerated Investment Incentive program, the company would be eligible to deduct up to 30% of the purchase price in the first year.

The above example has been simplified and does not reflect the full extent of the information presented in the statement. Please refer to the Government’s official statement for additional information and specific rules of the Accelerated Investment Incentive as it applies to different CCA classes.

This post has been prepared for general information purposes only and does not constitute advice nor opinion. The information presented may not be applicable in all circumstances. As such, please consult one of our trusted business advisors at RHN CPA for further clarification.