New tax write-offs from federal government

December 03, 2018

Written by Greenhouse Canada

Last week, Agriculture and Agri-Food Minister, Lawrence MacAulay highlighted key tax and investment incentives including full write-offs for clean energy technology and manufacturing equipment, as well as the Accelerated Investment Incentive for capital cost allowance.

Proposed in the Fall Economic Statement 2018, tax incentives include:
• Manufacturing and processing machinery and equipment – immediate write-off of full costs; applies to classes 43 and 53 if acquired after November 20, 2018
• Clean energy equipment – immediate write-off of full costs; applies to classes 43.1 and 43.2 if acquired after November 20, 2018 and available for use prior to 2028. Categories and eligibility requirements can be found here, including details on systems for Cogeneration and Specified-Waste Fuelled Electrical Generation, Thermal Waste Electrical Generation, Active Solar Heating and Ground-Source Heat Pumps, Small-Scale Hydro-Electric Installations, Heat Recovery, Wind Energy Conversion, Photovoltaic Electrical Generation, Geothermal Electrical Generation, Landfill Gas and Digester Gas Collection, and more
• Accelerated Investment Incentive – allows businesses “to write off a larger share of the cost of newly acquired assets in the year the investment is made”. For purchases of buildings, machinery or equipment, the deduction in the first year is up to three times the amount compared to previous rules. Does not apply to class 53 of “manufacturing and processing machinery and equipment” and classes 43.1 and 43.2 of “clean energy equipment” above
• Lowered Marginal Effective Tax Rate from 17 per cent to 13.8 per cent, giving businesses in Canada “the lowest overall tax rate on new business investment in the G7, significantly lower than that of the United States”

Funding also involves a $25 million investment over the next five years to support agriculture and food exporters, which includes:
• $12 million over five years for AAFC to access new markets for agriculture and agri-food exports, as part of the Export Diversification Strategy
• $11 million over five years is being provided to the Canadian Food Inspection Agency to support market access

An additional $13.6 million over three years will be invested by the federal government to improve transportation data, to support the movement of all goods including agricultural products.

"Many of the recommendations that CFA made in the 2019 pre-budget submission to help Canadian farmers were addressed, as well as recommendations by the agri-food economic strategy table,” says Ron Bonnett, president of the Canadian Federation of Agriculture. “This fiscal update shows that the federal government is taking the right steps to increase the competitiveness and efficiency of Canada's agricultural sector. This support is pivotal to achieve the target of increasing agricultural exports to $75 billion by 2025 which was set out in the 2017 Federal Budget"