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 (technically, 53 weeks); however, in certain circumstances, it can be shorter than 12 months.  This is known as a “short-fiscal period”. For example, if Gary opens a business on June 1^st and his fiscal period ends on December 31^st 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”.

Further details on ‘fiscal period’ and ‘taxation year’ can be found in ITA 249.1 and ITA 249 respectively.

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 1^st 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.

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