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2024 Federal Budget – Business tax measures


Accelerated Capital Cost Allowance

Purpose-built rental housing

Purpose-built rental buildings are eligible for a capital cost allowance (CCA) rate of 4% under Class 1. This budget proposes to provide an accelerated CCA of 10% for new eligible purpose-built rental projects that begin construction on or after April 16, 2024 and before Jan. 1, 2031, and are available for use before Jan. 1, 2036.

Consistent with the temporary enhancement to the GST new residential rental property rebate, to be eligible, the new purpose-built rental housing must be a residential complex:

With at least four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or 10 private rooms or suites; and
In which at least 90% of residential units are held for long-term rental

If the above conditions are met, the cost of converting existing non-residential real estate into a residential complex, as well as the cost of a new addition to an existing structure, would be eligible. However, renovations of existing residential complexes would not qualify.

Investments eligible for this measure would continue to benefit from the Accelerated Investment Incentive, which currently suspends the half-year rule for eligible property that is available for use before 2028.

Productivity-enhancing assets

This budget proposes to provide immediate expensing for new additions of property in respect of Class 44 (patents or the rights to use patented information for a limited or unlimited period), Class 46 (data network infrastructure equipment and related systems software), and Class 50 (general-purpose electronic data-processing equipment and systems software), if the property is acquired on or after April 16, 2024 and becomes available for use before Jan. 1, 2027. This measure would provide a 100% first-year deduction and would be available only for the year in which the property becomes available for use.

Restrictions and short taxation year

Property that has been used, or acquired for use, for any purpose before being acquired by the taxpayer would be eligible for the accelerated CCA only if the property was not previously owned by a non-arm’s length person and was not transferred to the taxpayer on a tax-deferred “rollover” basis.

The accelerated CCA would be prorated for short taxation years.

Legislative proposals to implement the excessive interest and financing expenses limitation (EIFEL) rules are included in Bill C-59, which received second reading on March 18, 2024. The EIFEL rules provide an exemption for interest and financing expenses incurred in respect of arm’s length financing for certain public-private partnership infrastructure projects.

Budget 2024 proposes to provide a $250,000 interest-free limit on Advance Payments Program loans for the 2024 program year. This is similar to the 2022 amount but a reduction from the $350,000 amount allowed for in 2023.

The Budget proposes to add a Carbon Tax Rebate for small businesses similar to the current system for individuals in affected provinces of Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

Budget 2024 proposes to return a portion of fuel charge proceeds from a province via the new Canada Carbon Rebate for Small Businesses, an automatic, refundable tax credit directly for eligible businesses, sized in proportion to the number of persons they employ in the province.

Eligible businesses
With respect to the 2019-20 to 2023-24 fuel charge years, the tax credit would be available to a Canadian-controlled private corporation that files a tax return for its 2023 taxation year by July 15, 2024. Additionally, to be eligible for a credit the corporation would need to have had no more than 499 employees throughout Canada in the calendar year in which the fuel charge year begins.

Automatic payments
Corporations would not have to apply for this tax credit. The Canada Revenue Agency would automatically determine the tax credit amount for an eligible corporation and pay the amount to the eligible corporation through the new Canada Carbon Rebate for Small Businesses.

Credit determination
The tax credit amount would be equal to the number of persons employed by the eligible corporation in the province in that calendar year multiplied by a payment rate specified by the Minister of Finance for the province for the corresponding fuel charge year. The Minister of Finance will specify payment rates for the 2019-20 to 2023-24 fuel charge years once sufficient information is available from the 2023 taxation year.

Since 2021, the government has announced a number of tax measures related to clean energy, including six new investment tax credits and reduced tax rates for zero-emission technology manufacturers, with legislation at various stages of progress. Building on the government’s commitment on clean initiatives, Budget 2024 announces details of the Clean Electricity Investment Tax Credit with the following design features:

  • A 15% refundable tax credit rate for eligible investments in new equipment or refurbishments related to: 
    1. Low-emitting electricity generation systems using energy from wind, solar, water, geothermal, waste biomass, nuclear, or natural gas with carbon capture and storage.
    2. Stationary electricity storage systems that do not use fossil fuels in operation, such as batteries and pumped hydroelectric storage.
    3. Transmission of electricity between provinces and territories.
  • The Clean Electricity Investment Tax Credit would be available to certain taxable and non-taxable corporations, including corporations owned by municipalities or Indigenous communities, and pension investment corporations.
  • Provided that a provincial and territorial government satisfies additional conditions, outlined below, the tax credit would also be available to provincial and territorial Crown corporations investing in that province or territory.
  • Robust labour requirements to pay prevailing union wages and create apprenticeship opportunities will need to be met to receive the full 15% tax credit.

The tax credit would apply to property that is acquired and becomes available for use on or after the April 16, 2024 budget date for projects that did not begin construction before March 28, 2023 and is available until 2035.

The information in this publication is current as of April 16, 2024

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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