Principal Issues: CCA classification of office desktop computers.
Position: General comments.
August 27, 2010
XXXXXXXXXX
Dear XXXXXXXXXX :
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence, which I received on July 14, 2010, concerning the 100% capital cost allowance (CCA) rate for computers acquired after January 27, 2009, and before February 1, 2011.
Generally, a taxpayer who acquires a depreciable property for the purpose of earning income from a business is required to include that property in one of the classes specified by the tax legislation, depending on the type of property acquired. The taxpayer can then claim a portion of the cost of the depreciable property as a CCA deduction when calculating business income for a fiscal period.
The 2009 federal budget proposed a temporary 100% CCA rate for eligible computers acquired after January 27, 2009, and before February 2011. As a result of this budget measure, amendments were made to the Income Tax Regulations to add Class 52.
In general terms, the 100% CCA rate for Class 52 property applies to general-purpose computer equipment, including related system software and ancillary data processing equipment that:
- is acquired after January 27, 2009, and before February 2011;
- is situated in Canada; and
- is acquired for the purpose of either earning income in a business carried on in Canada or earning income from property situated in Canada.
In addition, the property must be new in the sense that it was not previously used or acquired to be used for any other purpose.
Generally, the half-year rule allows only half of the CCA write-off that is otherwise available in the year an asset is first available for use. However, the 100% CCA rate under Class 52 is not subject to the half-year rule. In other words, businesses may deduct the full cost of an eligible computer in the first year in which the CCA deductions are available.
Bearing in mind the conditions mentioned above, desktop computers and ancillary printers that are acquired for general office use by a business can be included in Class 52. However, photocopiers and fax machines are not eligible for inclusion in Class 52, but are instead included in Class 8, which provides for a 20% CCA rate.
I trust that the information I have provided is helpful.
Yours sincerely,
Keith Ashfield
Minister of National Revenue
Tim Fitzgerald, CGA
2010-037501