For all of us struggling with the ups and downs of the economy here is a small piece of news that may or may not be new to you but may act as a reminder that if you are thinking of purchasing new equipment that this is the year to do it in.
The extension of the temporary accelerated capital cost allowance for new investment in machinery and equipment in the manufacturing and processing sector will enable manufacturing and processing companies to plan and invest and help create jobs in a sector that was particularly hard hit by the global recession.
The 50 per cent straight line depreciation is for eligible manufacturing or processing machinery and equipment. By allowing a faster write-off of eligible investments, this measure provides concrete support to businesses in the manufacturing and processing sector to help them retool with new machinery and equipment to remain competitive in the current global environment.
For example, a manufacturer that purchases an eligible machine for $10,000 is able to deduct $2,500 in the first taxation year (because of the half-year rule, which requires that the asset be treated as if purchased in the middle of the taxation year), $5,000 in the second taxation year, and the remaining $2,500 in the third taxation year. In the absence of the temporary accelerated capital cost allowance, the machine would be depreciated at a 30-per-cent declining-balance rate, resulting in lower annual deductions from income over a much longer period of time (i.e., the depreciation period would be nine taxation years to deduct 95 per cent of the value of the machine).
Economic Action Plan 2013 proposed to provide $1.4 billion of tax relief to Canada’s manufacturing sector and has extended it through 2015 to allow Canadian Manufacturers to take advantage of the temporary accelerated capital cost allowance for machinery and equipment.