IMMEDIATE CAPITAL ASSET WRITE-OFF: Budget 2021

08 Jun IMMEDIATE CAPITAL ASSET WRITE-OFF: Budget 2021

The 2021 Federal Budget proposed to allow immediate expensing of certain property acquired by a Canadian-controlled private corporation (CCPC) on or after April 19, 2021 (Budget Day) and before 2024. Up to $1.5 million per taxation year is available (shared among associated CCPCs, and prorated for short taxation years), with no carry-forward of excess capacity.

Property eligible for this immediate write-off is quite broad. It includes all depreciable capital property, other than certain assets with particularly long lives, such as buildings, physical infrastructure, pipelines and goodwill. As such, property acquired in the course of business, such as computers, vehicles, tools and machinery and equipment, would be eligible.

As this immediate write-off is discretionary, planning should be afforded to consider current and future profits.

Where capital costs of eligible property exceed $1.5 million in a year, the taxpayer would be allowed to 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 or zero-emission vehicles, would not reduce the maximum amount available.

Generally, property acquired from a non-arm’s length person, or which was transferred to the taxpayer on a tax-deferred “rollover” basis, would not be eligible. Also, while the taxpayer can always claim less than the maximum, claims in future years would be limited to the usual CCA rates.

ACTION ITEM: An immediate full write-off of many capital assets may provide an incentive to acquire capital assets.