Accelerated Investment Incentive
Accelerated investment incentive, which provides an enhanced first-year allowance for certain eligible property that is subject to the capital cost allowance (CCA) rules.
Offered by Canada Revenue Agency
Amount
no fixed amount
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Who can apply
You must acquire the EP after November 20, 2018, and it must be available for use before 2028 to qualify for the AII. A phase-out period begins for property that becomes available for use after 2023.
You can claim the enhanced first-year allowance for an EP only in the first tax year that the property becomes available for use.
Certain additional restrictions apply to EP. Under the AII, if you acquire property for which a CCA deduction or a terminal loss has been claimed before you acquired it, it is only eligible for the incentive if both of the following conditions are met:
- neither you nor a non-arm's length person previously owned the property
- the property has not been transferred to you on a tax-deferred "rollover" basis
In other words, properties acquired in non-arm's length and roll-over transactions are not eligible for this incentive. They are considered NEP.
In addition, new rules may apply for certain property constructed over multiple tax years and transferred between non-arm's length parties before it is put in use. Where the capital cost of a single property includes expenditures incurred at different times, and you claim CCA or a terminal loss under special rules with respect to some of these expenditures, the single property will be deemed to be split into separate portions such that the portion for which no CCA or terminal loss has been claimed may be treated as a separate property in the event of a subsequent transfer of the property. As a result, the portion for which no CCA or terminal loss has been claimed may qualify as AII property.
About the funding
The accelerated investment incentive (AII) measure provides an enhanced first-year allowance for certain eligible property (EP).
The incentive's general rule is made up of two elements:
- applying the prescribed CCA rate for a class up to one-and-a-half times the net addition to the class for the year
- suspending the CCA half-year rule (and equivalent rules for Canadian vessels and Class 13 property)
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As a result, an EP that would be subject to the half-year rule, in essence, qualifies for an enhanced first-year allowance equal to three times the normal first-year deduction. An EP not normally subject to the half-year rule (for example, a patent, franchise, or limited-period licence) qualifies for one-and-a-half times the normal first-year deduction.
The AII does not change the total amount that you can deduct over the life of a property. By claiming a larger CCA deduction in the first year, you will have smaller CCA deductions in future years.
For an EP that would normally be subject to the half-year rule (or an equivalent rule) and that becomes available for use during the 2024 to 2027 phase-out period, the enhanced first-year allowance is reduced to two times the normal first-year CCA deduction. The incentive continues to effectively suspend the half-year rule (and equivalent rules). In essence, you can calculate CCA at the rate relevant to that class without applying the half-year rule.
For an EP that would not normally be subject to the half-year rule (or an equivalent rule) and that becomes available for use during the 2024 to 2027 phase-out period, the enhanced first-year allowance is generally equal to one-and-a-quarter times the normal first-year CCA deduction.
As a result, as shown in examples 3 to 6, an enhanced first-year allowance of up to three times the normal first-year CCA deduction is available for property that would otherwise be subject to the half-year rule. The enhanced first-year allowance is reduced to two times the normal first-year CCA deduction in the 2024 to 2027 phase-out period, as seen in Example 6.
Enhanced first-year deductions in respect of Canadian development expenses and Canadian oil and gas property expenses
An enhanced deduction also generally applies to eligible Canadian development expenses (CDE) or Canadian oil and gas property expenses (COGPE) incurred after November 20, 2018, and before 2028. These expenses are not subject to a half-year rule and, thus, qualify for an enhanced first-year deduction equal to one-and-a-half times the normal first-year deduction that would otherwise be available. The additional deduction begins to phase out for expenses incurred after 2023. CDE and COGPE are also not subject to the available-for-use rule.
The incentive applies to property for which CCA is calculated on a:
- declining-balance basis (for example, intangible property, which is included in Class 14.1)
- straight-line depreciation (for example, leasehold improvements, patents, and limited period licences)
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