Budget 2024 Delivers Big Benefits for Small Rental Property and Tech Businesses

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    05 Jun 2024

    Budget 2024 Delivers Big Benefits for Small Rental Property and Tech Businesses 

    The Budget 2024 brought positive reforms for different segments of Canadian society – including small businesses. Out of all the benefits introduced for SMB owners in the latest budget, Accelerated Capital Cost Allowance (ACCA) deserves special mention for those who are dealing with rental property businesses & tech startups.   What’s the new development in ACCA? It's the accelerated tax depreciation for all new eligible purpose-built rental projects. Read the blog below further to have an informed discussion with your real estate accountant the next time you meet!  Without further ado, let’s get started!

    So, what exactly is the ACCA?

    In Canada, the ACCA is a tax measure that the government uses to encourage businesses to invest in some assets by letting them claim deductions faster on the cost of that asset for tax purposes.  ACCA is different from traditional depreciation, where the value of the asset is deducted over its expected life over several years. One can assume it is a tax break for equipment and property anyone uses for their business. Since the CRA allows it, many real estate tax services Canada providers deduct a portion of the cost of such assets from the taxes every year over a set period.  ACCA is significant for many small business owners, especially those dealing with rental properties. It sweetens the deal by letting the entrepreneur deduct a major portion of the cost of the property upfront and get more cash in their pocket at the present time.

    Key ACCA benefits in the Canada Budget 2024!

    • For those planning to build a rental property
    If the city where your business is located has a booming rental industry, then Budget 2024 has something for you. It has introduced a special ACCA for purpose-built rental housing.  It means one gets a higher deduction rate of 10% vs. the usual rate of 4% if they construct a new building for rental purposes with at least 4 units or 10 rooms. With ACCA, one can deduct a big chunk of the construction cost from the taxes in the first year. They don’t have to spread it across many years, which will leave the rental owners with cash flow that can be reinvested in operations, the hiring of new staff, and the improvement of the bottom line. Do you need help with clarification? Talk to a chartered professional accountant at CJCPA. Let’s put your business in a better financial position. Your first consultation is on us!
    • Invest in technology and see savings soar.
    Upgrading technology also involves investing in heavy assets. If updating your business's technology is on the cards, ACCA can help you with “immediate expensing”. It covers assets related to data networks, patents, and electronic data processing equipment. Here’s what it means: As a business owner, you don’t have to claim smaller deductions over time. You can claim the entire cost of equipment in its first year of usage. For example, you just bought some brand-new software to streamline your operations. With immediate expensing, you can deduct the entire cost of that software from your taxes in the year you purchased it.  This frees up cash for other business needs without waiting years to claim the full deduction.

    Who qualifies for these ACCA benefits?

    The good news? Accelerated Capital Cost Allowance measures are specifically designed to help SMBs like yours!   Whether you're a residential landlord building new rental units or a tech-savvy entrepreneur investing in innovative equipment, there's a good chance you can take advantage of these tax breaks.  Here are some details to not miss:
    1. Timeframe for eligible projects: New construction must begin on or after Budget Day and before January 1, 2031, and be available for use before January 1, 2036.
    2. Eligibility Requirements (property): For a property to be eligible, it must be a new purpose-built rental complex with at least four units or ten rooms, and 90% of units must be for long-term rentals. Renovations are not eligible, but new additions to existing structures can be.
    3. Restrictions: Previously owned property by the taxpayer or a non-arms-length person, or property acquired through a tax-deferred rollover, is not eligible.
    4. Short Taxation Year: ACCA is applied in a short taxation year (less than 12 months).
    However, remember that these are just the highlights. For the full details and to see if you qualify, it's always best to consult with the Corporate Planning & Compliance Canada firm.  They can help you understand the specifics of the ACCA program and ensure you're claiming all the deductions you're entitled to.

    Wrapping Up!

    Budget 2024 recognizes the importance of small businesses. These Accelerated Capital Cost Allowance benefits will put more money in your pocket, fuel growth, and encourage investment in our province's future.  So, seize the opportunity, explore the ACCA program, and watch your business thrive. If you want to run your business successfully in Canada, subscribe to our newsletter, which will help you do so!  CJCPA is an accounting and taxation firm in Canada, offering business solutions to startups and solopreneurs while also saving their tax money. It has teams of small business accountant Surrey who have years of experience working in the industry. For your first free consultation with these professionals, check out our Contact Us page.  
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