In its 2022 budget tabled April 7, the federal government confirmed the expansion of the temporary immediate expensing measure. In alignment with Alberta’s asks, the more generous tax treatment will now reach a greater number of the province’s job creators.
The measure, which applies for both Alberta and federal tax purposes, could generate hundreds of thousands of dollars in improved cash flow for businesses making large capital investments.
The federal government’s temporary immediate expensing measure allows eligible businesses to write off up to $1.5 million in qualifying investments in the first eligible year rather than having to claim these costs over multiple years.
When the measure was introduced in 2021, it applied only to Canadian-controlled private corporations. With support from Manitoba and Saskatchewan, Alberta’s government successfully lobbied Ottawa to extend the measure’s eligibility to include unincorporated businesses, including sole proprietorships.
“Thanks to Alberta’s leadership and advocacy, many more businesses across the country will now benefit from a broader and fairer application of the immediate expensing measure. We are pleased that Minister Chrystia Freeland and the federal government heard our calls for parity among the country’s job creators and increased access to this measure to further support investment and economic growth.”
“Small businesses power our rural economy, and the extension of this measure’s eligibility will have an immediate impact on job creators in Alberta’s rural communities.”
“These changes to the accelerated capital cost allowance are welcomed by farmers as they will level the playing field across all farm types. While many farmers struggled with tough drought and heat conditions last year, these changes can provide much needed flexibility to more farmers, from a tax planning perspective, to help manage cash flow.”
“Budget 2022 confirms the government’s intent to proceed with proposed legislation related to the immediate expensing of eligible property acquired by Canadian-controlled private corporations after April 18, 2021, and certain partnerships and sole proprietorships after Jan. 1, 2022. While this is a step in the right direction, the government should ensure that legislation is passed in a timely manner, as administratively, capital cost allowance claims can only be processed by the Canada Revenue Agency once the supporting legislation receives royal assent.”
The expansion of the immediate expensing measure to include unincorporated businesses will apply retroactively to eligible investments made on or after Jan. 1, 2022.
- The immediate expensing measure will allow qualifying businesses an additional writeoff of up to $1.5 million in qualifying expenditures per taxation year. This additional writeoff will help encourage investment by improving cash flow in the year the investment is made.
- Expenses related to a variety of assets (i.e., machinery and equipment) will qualify for the measure. However, expenditures related to property, generally described as long-lived assets (i.e., buildings), will not qualify.
- When initially announced in the 2021 federal budget, the immediate expensing measure was only available to Canadian-controlled private corporations. Businesses that were publicly traded or unincorporated were excluded.
- By excluding other legal forms of businesses such as sole proprietorships, sectors of Alberta’s economy were being left out from taking advantage of this tax measure.
- Alberta’s government, along with Saskatchewan and Manitoba, advocated for the measure to be extended to unincorporated businesses.