33 What is the Accelerated Incentive Investment and how does it work?
Panveer Kaur
Accelerated Investment Incentive (AII) allows businesses to claim one and a half times CCA on net eligible property additions in the first year of purchase of the property. The property will qualify as an eligible property if that is acquired after November 2018 and becomes available for use before 2028. This rule is only applicable to arm’s length transactions.
Furthermore, Accelerated Investment Incentive also allows businesses to deduct 100% of the capital cost of Class 53, Classes 43.1, and 43.2 assets in the year of acquisition of these assets.
Under accelerated investment incentive, businesses will add the 50% of net eligible property additions to adjust UCC to claim one and a half times CCA, whereas, under the half-year rule, businesses used to deduct 50% of net additions in the first year of purchase. This incentive will allow businesses to claim larger CCA in the first year without changing the total amount of CCA that can be claimed over the life of the asset.
Example:
3C’s Inc has the UCC balance of $100 at the beginning of 2018 of Class 10 and purchased an additional property of $200 in January. In 2019, it purchased additional eligible asset of $200. In 2020, it acquired an eligible asset of $300 and disposed the property for $150, which has a capital cost of $200.
|
Calculation Steps |
2018 |
2019 |
2020 |
|
UCC at the beginning (A) |
$100 |
$240 |
$278 |
|
Additions |
$200 |
$200 |
$300 |
|
Disposition during the year: Lessor of Proceeds of Disposition Capital cost |
– |
– |
($150) |
|
Net Additions during the year (B) |
$200 |
$200 |
$150 |
|
50% of net eligible additions as per AII rules (C) |
N/A |
$100 |
$75 |
|
Half-year rule (D) |
($100) |
N/A |
N/A |
|
Adjusted UCC for CCA calculation(A+B+C-D) |
$200 |
$540 |
$503 |
|
CCA= 30% * adjusted UCC |
($60) |
($162) |
($151) |
|
Less: 50% of net eligible additions as per AII rules |
N/A |
($100) |
($75) |
|
Add: 50% of Half year rule deductions |
$100 |
N/A |
N/A |
|
UCC at the end of 2020 |
$240 |
$278 |
$277 |
Interactive content (Author: Wahaj Awan, January 2020)
Interactive content (Author: Danica McCormack, January 2020)
References and Resources:
January 2020
