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Accelerated CCA

Updated: 2019-01-25

In the 2018 Federal Fall Economic Statement, the federal Minister of Finance introduced the Accelerated Investment Incentive (AII). This measure allows Canadian businesses to write off a larger share of the cost of newly acquired depreciable assets (tangible and intangible) in the year the investment is made. 

The changes affect Capital Cost Allowance (CCA) calculations in 2018 T1 returns, as well as T2, T3 and T5013 returns with fiscal years ending after November 20, 2018. The federal and provincial rules described below will be in force until 2024, when transitional rules will take over.

  • For Alberta AT1 returns, the same federal rules apply to the accelerated CCA calculations.
  • For Québec CO-17 and 2018 TP1 returns, the same federal rules apply in general, with some adaptations. Please review the Québec section of this article to learn more.

Status of Accelerated CCA calculations in TaxCycle

CCA calculations and the S8Asset asset manager have been updated in TaxCycle T2 (see below for details). Similar changes are coming soon to TaxCycle T1, T3 and T5013.

Calculation of Accelerated CCA on the Asset Manager

To calculate accelerated CCA in TaxCycle, related sections, fields and questions appear on the asset manager to calculate accelerated CCA and explain the applicable rules. (Asset managers include the S8Asset in T2, the T2125Asset in T1, etc.) 

  1. If the tax year of a corporation ends after November 20, 2018, you must enter the date of purchase in the Transaction date field when entering an addition. TaxCycle uses this date to determine if the addition is eligible for accelerated CCA.
  2. If you enter a transaction date that is after November 20, 2018, TaxCycle answers Yes to the AIIP? question. This indicates that the addition is eligible for an accelerated CCA. If you open an existing file and do not have a transaction date on a current-year addition, the answer to the AIIP question remains No until you enter an eligible date.
  3. TaxCycle also automatically answers Yes to the Québec AIIP? question when the Québec measures apply to the addition.
  4. IMPORTANT! Generally, the half-year rule is suspended for an eligible addition. This occurs automatically in TaxCycle when calculating the accelerated CCA. DO NOT answer NO to the half-year rule question on the asset manager to achieve this result. Answer the question based on whether the half-year rule would apply in normal circumstances and TaxCycle will take care of the rest. For example, you should still answer No when a taxpayer is incorporating and rolling over existing assets into the corporation, regardless of the transaction date.
  5. Eligible additions are transferred to the AIIP addition row in the Net addition calculation section of the asset manager, and a corresponding UCC bump-up is calculated.
  6. If the transaction date is before November 21, 2018, the addition is not eligible for accelerated CCA. TaxCycle answers the AIIP? with No. This indicates that the addition is not eligible for an accelerated CCA.
  7. Ineligible additions are transferred to the Non AIIP addition row in the Net addition calculation section of the asset manager, and any applicable half-year adjustment is calculated.
  8. When you enter a disposition, TaxCycle first applies the amount to any Non AIIP additions.
  9. If there is a remaining disposition amount, it is then applied to AIIP additions.
  10. For additional information about the calculations, refer to the Accelerated Investment Incentive Property (AIIP) section which explains the applicable rule and calculation. This section changes based on the Class of the asset selected at the top of the asset manager.
  11. To collapse/hide or expand/show the notes in the Accelerated Investment Incentive Property (AIIP) section, click the arrow on the far left of the section title.

2019-s8asset-aiip-addition-disposition

Rules and Examples

Click the following links to jump down to an explanation of the rules for a specific class:

Related Government Documents

General Rule

Property eligible for accelerated CCA is called “Accelerated Investment Incentive Property” (AIIP). AIIP is depreciable property purchased by a taxpayer after November 20, 2018, and which must become available for use before 2028. In general, AIIP is not subject to the half-year rule, and it is eligible for CCA equal to three times the normal first-year CCA.

In addition, the following conditions must both be met in order to qualify as AIIP:

  • neither the taxpayer nor a non-arm’s-length person can have previously-owned the property; and
  • the property cannot have been transferred to the taxpayer on a tax-deferred “rollover” basis.

For additions made after November 20, 2018 and before 2024, the half-year adjustment is suspended and the Undepreciated Capital Cost (UCC) base is increased by 50% of the “net” acquisition cost for the purposes of calculating CCA in the year of acquisition.

Where UCC of a class is increased in a year by both additions before November 21, 2018 and additions after November 20, 2018, and there is a disposition at any time during the tax year, the disposition must first reduce pre-November 21, 2018 addition before post-November 20, 2018 additions to calculate the net addition.

For additions after 2023 and before 2028, a transitional rule applies.

Example: General Rule

Applicable to all classes except classes 13, 14, 43.1, 43.2 and 53 (and 14, 14.1, 44 and 50 for Québec)

Tax year: January 1, 2018 to December 31, 2018
Class 8 addition on March 18, 2018 (not eligible for accelerated CCA): $500
Class 8 addition on November 21, 2018 (eligible accelerated for CCA): $1,000
Opening UCC: $2,550
Normal CCA Accelerated CCA
Opening UCC $2,550 $2,550
Addition before November 21, 2018 $500 $500
Addition after November 20, 2018 $1,000 $1,000
Adjusted UCC $4,050 $4,050
Half-year adjustment ($750) ($250)1
UCC adjustment n/a $5002
UCC base for CCA $3,300 $4,300
CCA rate 20% 20%
CCA $660 $860
Ending UCC $3,390 $3,190

Notes:
1. Half-year adjustment:
Pre November 21, 2018 addition: $500 x 50% = $250
Post November 20, 2018 addition: suspended
2. UCC adjustment: post November 20, 2018 addition of $1,000 x 50%

Federal Special Rules

Class 13

In the year of acquisition, a new leasehold acquired after November 20, 2018 and before 2024 is eligible for 150% of the amount calculated in accordance with Schedule III of the Income Tax Act Regulation, and the half-year rule is suspended. For additions made after 2023 and before 2028, a transitional rule applies.

Example: Class 13

Tax year: January 1, 2018 to December 31, 2018
Leasehold interest: $210,000
Lease term: November 21, 2018 to November 20, 2023
(Five 12-month periods at an annual CCA of $42,000)
Normal CCA Accelerated CCA
Addition $210,000 $210,000
Half-year adjustment n/a1 n/a
UCC adjustment n/a n/a
UCC base for CCA $210,000 $210,000
CCA rate n/a n/a
CCA $21,0002 $63,0003
Ending UCC $189,000 $147,000

Notes:
1. Half-year adjustment made directly to CCA.
2. $210,000/5 periods x half-year rule = $21,000
3. $210,000/5 periods x 150% = $63,000 (half-year rule suspended)

Class 14

In the year of acquisition, a taxpayer is eligible for an additional 50% CCA for an intangible asset acquired after November 20, 2018 and before 2024. For additions made after 2023 and before 2028, a transitional rule applies.

Example: Class 14

Tax year: January 1, 2018 to December 31, 2018
Class 14 addition on November 21, 2018 (eligible for accelerated CCA): $100,000
Life of the intangible asset: November 21, 2018 to November 20, 2025 (2,557 days)
Number of days of amortization from date of purchase to tax year-end: 41 days
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment n/a1 n/a
UCC adjustment n/a n/a
UCC base for CCA $100,000 $100,000
CCA rate n/a n/a
CCA $1,6032 $2,4053
Ending UCC $98,397 $97,595

Notes:
1. Half-year adjustment does not apply to class 14.
2. $100,000/2,557 days x 41 days = $1,603
3. $100,000/2,557 days x 41 days x 150% = $2,405

Classes 43.1, 43.2 and 53

A special rule applies to manufacturing and processing equipment to allow it to be fully written off. For an acquisition made after November 20, 2018 and before 2024, in the year of acquisition, the half-year adjustment is suspended and 100% of the cost of the addition can be claimed as CCA. For class 43.1, the UCC is increased by 7/3 of the cost of acquisition in the year of acquisition. For classes 43.2 and 53, the UCC is increased by 100% of the cost of acquisition in the year of acquisition.

Example: Class 43.1

Tax year: January 1, 2018 to December 31, 2018
Class 43.1 addition on November 21, 2018 (eligible for accelerated CCA): $100,000
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment ($50,000) n/a
UCC adjustment n/a $233,3331
UCC base for CCA $50,000 $333,333
CCA rate 30% 30%
CCA $15,000 $100,000
Ending UCC $85,000 $0

Notes:
1. $100,000 x 7/3

Example: Class 43.2 and 53

Tax year: January 1, 2018 to December 31, 2018
Class 43.2/53 addition on November 21, 2018 (eligible for accelerated CCA): $100,000
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment ($50,000) n/a
UCC adjustment n/a $100,0001
UCC base for CCA $50,000 $200,000
CCA rate 50% 50%
CCA $25,000 $100,000
Ending UCC $75,000 $0

Notes:
1. $100,000 x 100%

Québec Special Rules

For classes 14, 14.1, 44 and 50, Québec allows for full write-off of eligible assets purchased after December 3, 2018.

Class 14 for Québec

Additions made after December 3, 2018 are eligible for CCA equal to the full cost of the addition.

Example: Class 14 for Québec

Tax year: January 1, 2018 to December 31, 2018
Class 14 addition on December 4, 2018 (eligible for accelerated CCA): $100,000
Life of the intangible asset: December 4, 2018 to December 2, 2025 (2,557 days)
Number of days of amortization from date of purchase to tax year-end: 28 days
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment n/a1 n/a
UCC adjustment n/a n/a
UCC base for CCA $100,000 $100,000
CCA rate n/a n/a
CCA $1,0952 $100,0003
Ending UCC $98,397 $0

Notes:
1. Half-year adjustment does not apply to class 14.
2. $100,000/2,557 days x 28 days = $1,095
3. $100,000

Class 14.1 for Québec

Additions made after December 3, 2018 are eligible for full write-off. The half-year rule is suspended and UCC is increased by an amount equal to 19 times the net addition, resulting in accelerated CCA equal to the full cost of the addition.

Example: Class 14.1 for Québec

Tax year: January 1, 2018 to December 31, 2018
Class 14.1 addition on December 4, 2018 (eligible for accelerated CCA): $100,000
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment ($50,000) n/a
UCC adjustment n/a $1,900,0001
UCC base for CCA $50,000 $2,000,000
CCA rate 5% 5%
CCA $2,500 $100,000
Ending UCC $97,500 $0

Notes:
1. $100,000 x 19

Class 44 for Québec

For Québec, additions made after December 3, 2018 are eligible for accelerated CCA. The half-year rule is suspended and UCC is increased by an amount equal to three times the net addition, resulting in accelerated CCA equal to the full cost of the addition.

Example: Class 44 for Québec

Tax year: January 1, 2018 to December 31, 2018
Class 44 addition on December 4, 2018 (eligible for accelerated CCA): $100,000
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment ($50,000) n/a
UCC adjustment n/a $300,0001
UCC base for CCA $50,000 $4,000,000
CCA rate 25% 25%
CCA $12,500 $100,000
Ending UCC $87,500 $0

Notes:
1. $100,000 x 3

Class 50 for Québec

Additions made after December 3, 2018 are eligible for accelerated CCA. The half-year rule is suspended and UCC is increased by an amount equal to 9/11 times the net addition, resulting in accelerated CCA equal to the full cost of addition.

Example: Class 50 for Québec

Tax year: January 1, 2018 to December 31, 2018
Class 50 addition on December 4, 2018 (eligible for accelerated CCA): $100,000
Normal CCA Accelerated CCA
Addition $100,000 $100,000
Half-year adjustment ($50,000) n/a
UCC adjustment n/a $81,8181
UCC base for CCA $50,000 $181,818
CCA rate 55% 55%
CCA $27,500 $100,000
Ending UCC $72,500 $0

Notes:
1. $100,000 x 9/11