Immediate Expensing: Budget 2021 and the Expanding Opportunities

In 2021, the Department of Finance unveiled an enticing opportunity for certain Canadian businesses to immediately claim up to $1.5 million per year in depreciation expense on eligible properties. This strategic move was designed to bolster the economy, facilitate business growth, and incentivize investments in the nation.

In this article, Crowe MacKay's tax advisors help Canadians navigate the complexities of the immediate expensing framework introduced in Budget 2021. Our experts share details on qualifying assets, eligibility, and crucial deadlines related to the policy. By staying informed, businesses can optimize their investments and leverage tax benefits. If you require assistance, connect with us in Alberta, British Columbia, Northwest Territories, or the Yukon.

Scope and Range of Qualifying Assets 

While the variety of eligible properties is generous, the program explicitly excludes assets with extended life spans, most notably buildings that would be categorized as Class 1 through 6 assets. Furthermore, with the Department of Finance's recent expansions, more businesses can now consider benefiting from these tax advantages, subject to meeting specific criteria. 

Eligibility Criteria for Immediate Expensing

Since this initiative's inauguration, certain eligible persons or partnerships (EPOP) have availed the benefits of the immediate expensing framework. An EPOP includes: 

1. A corporation that was a Canadian controlled private corporation (CCPC) throughout the year;
2. Individuals, barring trusts, there were a resident of Canada throughout the year;
3. A Canadian partnership where, throughout the period, each member is a person described in 1. or 2. above.

For a deeper dive into this immediate expensing framework, consider the following references from the Government of Canada:

• Department of Finance Legislative Proposals
• Budget 2021 Annex
• What's New for Corporations

Gearing Up for the December 2023 Deadline

With September already behind us, it is important to be aware of the timelines established by the Department of Finance for these tax measures.

Immediate Expensing (EPOP)

Until December 31, 2023, an EPOP can leverage these benefits, provided the property is procured, operationally ready, and was essentially unused before its procurement.

Extended Window for Certain Unincorporated Businesses

Unincorporated businesses carried on directly by Canadian resident individuals and partnerships exclusively consisting of Canadian individuals may have an extended window to utilize the immediate expensing incentive until December 31, 2024. 

Conclusion

If feasible, consider purchasing capital assets for your business before December 31, 2023, rather than in early 2024. This type of planning can help ensure that your business can benefit from the immediate expensing incentive.

 

This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice. 

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