Budget 2009 – Computer details for Small Business

Here is the lowdown from the Budget 2009 website from the Department of Finance

http://www.budget.gc.ca/2009/plan/bpa5a-eng.asp#Business

Tax Measures: Supplementary Information and Notices of Ways and Means Motions

Computers: Accelerated CCA

In general, computers acquired after March 18, 2007, are included in Class 50 of Schedule II to the Income Tax Regulations and are eligible for a 55-per-cent declining-balance capital cost allowance (CCA) rate. Budget 2007 increased the CCA rate to 55 per cent from 45 per cent to better reflect the useful life of these assets.

CCA Class 50 (Computers)

Computer equipment is described in Class 50 of Schedule II to the Income Tax Regulations as general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment but not including property that is principally or is used principally as:

(i) Electronic process control or monitor equipment;

(ii) Electronic communications control equipment;

(iii) Systems software for a property referred to in subparagraph (i) or (ii); or

(iv) Data handling equipment unless it is ancillary to general-purpose electronic data processing equipment.

Budget 2009 proposes a temporary 100-per-cent CCA rate for eligible computers and software acquired after January 27, 2009 and before February 2011. This 100-per-cent CCA rate will not be subject to the half-year rule, which generally allows half the CCA write-off otherwise available in the year the asset is first available for use by the taxpayer. As a result of this measure, a business will be able to fully deduct the cost of an eligible computer (including the systems software for that computer) in the first year that CCA deductions are available.

For this purpose eligible computers and systems software acquired by a taxpayer will be computer equipment and software described in Class 50 of Schedule II to the Income Tax Regulations, as described above, that

  • is situated in Canada,
  • is acquired by the taxpayer
    • for use in a business carried on by the taxpayer in Canada or for the purpose of earning income from property situated in Canada, or
    • for lease by the taxpayer to a lessee for use by the lessee in a business carried on by the lessee in Canada or for the purpose of earning income from property situated in Canada, and
  • has not been used, or acquired for use, for any purpose before it is acquired by the taxpayer for use in Canada.

The 100-per-cent CCA rate will also apply to property that is currently included in CCA class 29, that would otherwise be described in Class 50 of Schedule II to the Income Tax Regulations, and that meets the conditions described above.

The computer tax shelter property rules, which prevent CCA deductions from being used by investors to shelter other sources of income, will also apply to computer equipment that is eligible for the 100-per-cent CCA rate.

This temporary measure could result in some limited adverse environmental effects to the extent that computer equipment that is being replaced is not stored, reused, recycled or disposed of in an environmentally-friendly manner. However, there are a number of government and industry programs that encourage re-use and proper disposal of electronic equipment.

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One Response to Budget 2009 – Computer details for Small Business

  1. I’ve been involved in taxes for longer then I care to admit, both on the personal side (all my working life!!) and from a legal standpoint since passing the bar and pursuing tax law. I’ve provided a lot of advice and righted a lot of wrongs, and I must say that what you’ve posted makes perfect sense. Please keep up the good work – the more people know the better they’ll be equipped to deal with the tax man, and that’s what it’s all about.

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