Canadian businesses investing in data management capabilities before January 1, 2027 will be able to deduct the full capital cost of some key purchases in the year they come into use. The newly released 2024 federal budget opens an approximately 32-month window, granting 100 per cent capital cost allowance (CCA) for designated “innovation-enabling and productivity-enhancing” assets.

These include:

• patents or the licences to use them, which normally have a 25 per cent CCA rate;
• data network infrastructure equipment and related software, which normally have a 30 per cent CCA rate; and
• general-purpose data processing equipment and related software, which normally have a 55 per cent CCA rate.

The accelerated CCA applies for assets acquired on or after April 16, 2024 and is only available in the year that they come into use, which must be before January 1, 2027. It is estimated it will be a $725 million benefit to claimants over the lifetime of the program.

“Businesses that invest in cutting-edge technologies are a key driver of Canada’s economic growth,” the budget document states. “The government wants to encourage Canadian businesses to invest in the capital — both tangible and intangible — that will help them boost productivity and compete productively in the economy of tomorrow.”

The 2024 budget also introduces temporary accelerated CCA for new purpose-built rental housing, increasing the annual depreciation rate from 4 to 10 per cent. This will apply for projects that commence construction between April 16, 2024 and December 31, 2030, and are ready for occupancy before January 1, 2036

Other eligibility requirements mirror those already in place for the elimination of the goods and service tax (GST) on new rental housing construction — applying to new rental housing construction, additions or conversions from commercial uses that comprise at least four private apartments or at least 10 suites or rooms.

“Increasing the capital cost allowance rate from 4 per cent to 10 per cent will incentivize builders by moving projects from unfeasible to feasible, through increased after-tax returns on investment,” the budget document states. “Allowing homebuilders to deduct certain depreciation expenses over a shorter period of time allows homebuilders to recover more of their costs faster, enabling further investment of their money back into new housing projects.”