49 What is the purpose of the short-fiscal period rule?

Gurvir Sahota

ITA 249(2) (a)- A “Fiscal Period” is the time when a new taxation year is beginning and the current taxation year is ending (See ITA 249.1(1) for further explanation).

A fiscal period is the time between a start of a business and its year-end which is usually the calendar year. A fiscal period cannot be more than 12 months; however, it can be shorter than 12 months also known as a “short-fiscal period”. For example, if Gary opens a business on June 1st and his fiscal periods ends on December 31st then his fiscal period would consist of 214 days instead of 365 days. This would be known as a “short-fiscal period for Gary’s business. A business reports its income based on the fiscal period. A business that goes bankrupt prior to its fiscal year-end would also have a  “short-fiscal period”.

How the short-fiscal period relates to capital cost allowance?

CCA rates are based on a full year. Therefore, an adjustment is made to the CCA of a business that was in operation for less than a year.

If one has a short-fiscal period that consists of less than 365 days, they take into consideration the days the business was operating. For example, Tim shuts down his tire company on September 1st and his CCA would have been $4,000 for the full year.  Because Tim had a short-fiscal period of 243 days, his actual CCA would be calculated as $2,663 ($4,000 x (243/365)). Therefore, the CCA has to be prorated, as the CCA claim is based on the days in your fiscal period.

Interactive content (Author: Gurvir Sahota, January 2019)

Interactive content (Author: Ning Zhang)

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January 2019


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