The 2009 federal budget submitted this week to the Canadian parliament contains measures to stimulate the economy. One of these measures got my attention: accelerated capital cost allowance (CCA) for computer purchases and related system software.
Disclaimer: I am neither an accountant nor a tax specialist. What follows reflects my own understanding which is not that of an expert. Any use and interpretation of this material should be first validated with a qualified professional.
The measure proposes a temporary CCA rate of 100% and a waiver of the half-year rule for computer hardware and software (class 50) purchased after January 27, 2009 and before February 1st, 20011.
Here’s a brief comparison of the situation before and after the measure:
|
Before |
After | |
|
CCA rate for class 50 |
55% |
100% |
|
Half-year rule |
Applicable |
Non applicable |
|
Impact on a 10 000 $ purchase |
2 750 $ counted as an operation expense the first year |
10 000 $ counted as an operation expense the first year |
|
Tax savings for year 1, based on a 30% tax rate |
825$ |
3 000 $ |
Please note that class 50 includes “computers, system software and related equipment” while class 12, which always benefited from a 100% CCA rate, covers “application software, […], medical instruments worth less than 500$ […]”.
The numbers I propose here are gross approximations and might even be totally wrong (:-), but this measure is still clearly positive for anyone doing business in Canada.
If anyone has information on what qualifies a software purchase for class 12 and 50 CCA, or can confirm / infirm the hypotheses I put forth here, your comments will be greatly appreciated!
Françis Dion
I confirm the above statements.
Posted by: James | February 11, 2009 at 08:27 AM