Accelerated investment incentive properties (AIIP)

Originally announced in the fall economic statement of 2018, this measure allowed businesses to triple the first year CCA rate for depreciable properties available for use in the tax year.

Eligible property was defined as follows [ITR 1104(4)]:

a)        The property must be acquired after November 20, 2018

b)       The property becomes available for use before 2028

c)        The property meets either of the following conditions:

                                        i.               No one has claimed CCA (or terminal loss) on the property OR

                                      ii.               The property was not acquired by "rollover" [ITA 85] and was not previously owned by the taxpayer or a person with whom the taxpayer did not deal at arm's length.

A phase-out period began for property that becomes available for use after 2023 [ITR 1100(2)]. For eligible property that becomes available for use during the 2024-2027 phase-out period, the incentive will effectively suspend the half-year rule (and equivalent rules) [ITR 1100(2)].

With the fall economic statement of 2024, the federal government reinstated the tripling of the first year CCA rate for eligible property acquired and available for use as of January 1, 2025.

Immediate expensing (100% CCA)

Immediate expensing allows businesses to claim 100% CCA on targeted depreciable properties. The properties are:

·        Class 44 (patents or the rights to use patented information for a limited or unlimited period)

·        Class 46 (data network infrastructure equipment and related systems software)

·        Class 50 (general-purpose electronic data-processing equipment and systems software).

For the classes above, 100% CCA is available for new additions in those classes if the property is acquired on or after Budget Day 2024 (April 16, 2024) and becomes available for use before January 1, 2027. Property that becomes available for use after 2026 and before 2028 would continue to benefit from the Accelerated Investment Incentive.

Immediate expensing is also available for other eligible property acquired and available for use on or after January 1, 2025. The properties are:

·        Class 53 (Manufacturing or processing machinery and equipment)

·        Class 43.1 (clean energy generation and energy conservation equipment)

·        Classes 54, 55, and 56 (zero-emission vehicles).

Class 1 buildings used almost exclusively (90%+ of the floor space) for manufacturing and processing will also benefit from immediate expensing for eligible properties that are acquired on or after Budget Day 2025 (November 5, 2025) and are first used for manufacturing or processing before 2030.

An enhanced first-year CCA rate of 75 per cent would be provided for eligible property in 2030 or 2031, and a rate of 55 per cent would be provided for eligible property that is first used for manufacturing or processing in 2032 or 2033. The enhanced rate would not be available for property that is first used for manufacturing or processing after 2033.

Comparative between the measures

The table below summarizes the different measures currently in effect for CCA and compares them with the standard measures.

Other considerations

Although taking the accelerated depreciation rates offered by both AIIP and immediate expensing can represent significant tax reduction for businesses, they could trigger substantial recaptures when these assets are sold in the future.