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MNP 2018 Federal Fall Economic Statement

November 21, 2018

MNP 2018 Federal Fall Economic Statement

Synopsis
5 Minute Read

MNP summarizes new economic incentives issued in the federal government’s Fall Economic Statement on Wednesday, November 21, 2018.

Federal Fall Economic Statement – 2018

FALL ECONOMIC STATEMENT HIGHLIGHTS

On Wednesday, November 21, 2018 the Honourable Bill Morneau, Minister of Finance, tabled the 2018 Fall Economic Statement – Investing in Middle Class Jobs.

This was a highly anticipated speech, as many Canadians were looking for a response to promote Canada’s competitiveness. At this point in time, limited new tax measures are introduced; the highlights are detailed below:

Income Tax Rates

No changes were announced to personal or corporate income tax rates or thresholds.

Full Expensing for Manufacturing and Processing Machinery and Equipment and Clean Energy Equipment

The Fall Statement announced that machinery and equipment used in Canada for the manufacturing and processing of goods, as well as specified clean energy equipment, will be eligible for immediate expensing. Qualifying assets acquired on or after November 21, 2018 will be eligible for a full tax write-off in the year it is put in use in the business. The half-year rule will be suspended for property that is eligible for this measure.

These proposals will be gradually phased out starting in 2024 and will no longer be in effect for investments put in use after 2027.

Accelerated Capital Cost Allowance (CCA) Measures

The government introduced an Accelerated Investment Incentive to allow businesses in Canada to deduct the cost of their investments more quickly, thus increasing the attractiveness of making capital investments. The Accelerated Investment Incentive will provide an enhanced first-year allowance for most capital property that is subject to the CCA rules.

The Accelerated Investment Incentive will generally be calculated by applying the prescribed CCA rate for a class to one-and-a-half times the net addition to the class for the year (or three times the normal first-year allowance when subject to the half-year rule). The larger deduction in the first year will be offset by smaller deductions in respect of the property in future years.

The Accelerated Investment Incentive will be available for eligible property that is acquired after November 20, 2018 and which becomes available for use before 2028, subject to a phase-out for property that becomes available for use after 2023.

Illustrative Impact of Proposed Measures on Selected Assets, Deduction in the First Year*

Immediate Expensing Normal Proposed Measures
Manufacturing and processing machinery and equipment 25% 100%
 Clean energy equipment  25%  100%
 Clean energy equipment Accelerated Investment Incentive  25%  100%
 Computer software  50%  100%
 Computers  27.50%  82.50%
 Trucks and tractors for hauling freight  20%  60%
 Motor vehicles  15%  45%
 Earth-moving equipment  15%  45%
 Data network infrastructure equipment  15%  45%
 Aircraft  12.50%  37.50%
 Office equipment  10%  30%
 Fibre-optic cables 6%   18%
  Buildings used in manufacturing and processing  5%  15%
 Other non-residential buildings  3%  9%
Goodwill1 2.50% 7.50%
 Other2  Variable  Up to 3x normal rate

1Goodwill is an intangible business asset that is linked business. In practice, goodwill is the difference between business and the value of the net assets (e.g. buildings, sale.

2 The category "other" includes all other capital assets, that are not presented in this table. * reproduced from the Fall Economic Statement, linked to the established between the price paid buildings, equipment) acquired assets, including intangible Statement, Department of established reputation of a paid to acquire a acquired during the intangible capital of assets, that are not presented in this table.

* reproduced from the Fall Economic Statement, Department of Finance

Other Measures

  • A new refundable tax credit for qualifying news organizations was introduced and will be effective January 1, 2019. The credit will support labour costs associated with producing original news content and will generally be available to both non-profit and for-profit news organizations.
  • A new temporary non-refundable tax credit for qualifying subscribers of Canadian eligible digital news media was also introduced. Details on the 15 percent tax credit will be provided in Budget 2019.
  • The Mineral Exploration Tax Credit, scheduled to expire March 31, 2019, has been extended for an additional five years, until March 31, 2024.

ABOUT MNP

MNP is a leading national accounting, tax and business consulting firm in Canada. We proudly serve and respond to the needs of our clients in the public, private and not-for-profit sectors. Through partner-led engagements, we provide a collaborative, cost-effective approach to doing business and personalized strategies to help organizations succeed across the country and around the world.

Regional Tax Contacts

Name Region Phone Number
 James Kungel  Vancouver Island  250.734.4303
 Kevin Wong  Vancouver  604.685.8408
 Ryan Hoag  Lower Mainland  604.637.1502
 Christopher Tilbury  Fraser Valley  604.870.6910
 Brian Posthumus  Okanagan  250.979.1736
 Randy Bella  Calgary  403.536.5536
 Graham Heron  Central Alberta  403.356.1255
 Mark Bernard  Edmonton  780.453.5388
 Kim Drever  Peace River  780.832.4287
 Michael Unick  Lethbridge  403.317.2770
 Cindy Heinrichs  Cypress  306.770.3627
 Jeff Henkelman  North Saskatchewan  306.664.8301
 Wayne Paproski  South Saskatchewan  306.790.7941
 Derek Innis  Winnipeg  204.788.6093
 Michael Poole  Southern Manitoba  204.571.7641
 Steve Blazino  Northwest Ontario  807.623.2141
 Ryan Devereux  Southwest Ontario  519.679.8550
 Bryan Walters  South Central Ontario  289.293.2314
Jeanne Cheng Toronto North 416.596.1711
Don Carson Toronto 416.263.6930
 Rosario Suppa  GTA-West  416.641.4948
 Gavin Miranda  Ottawa  613.691.4224
 Sean Sprackett  Montreal  514.228.7822
 Jerry Inman  Atlantic Canada  902.493.5464

Service Line Leaders

Name Region Phone Number
Am Lidder International Tax 778.571.3535
Heather Weber Indirect Tax 250.979.2575
Jay McLean SR&ED Tax  519.772.2986

Senior Vice President, Tax

Name Region Phone Number
Am Lidder SVP, Tax Services 778.571.3535

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