March 2004

Business Tax Incentives in a Nutshell

Increased Small Business Deduction Threshold
The federal small business deduction threshold will increase to $300,000 beginning on January 1, 2005 from the existing $250,000 level. It was originally scheduled to increase to $275,000 in 2005 and to $300,000 in 2006. This will provide small businesses with a greater opportunity to reinvest in their businesses by deferring the personal tax burden.

Operating Losses Have a Longer Life
The carry-forward period for operating losses incurred in taxation years ending after March 22, 2004 is being extended from 7 years to 10 years. The 3-year loss carry-back remains in place. The change is applicableto all corporations, although the change is designed to assist those new businesses that incur losses for a number of years before they become profitable.

Rapidly Depreciating Equipment = Rapid Write-Off
The rate of write-off for computer equipment acquired after March 22, 2004 is being increased from 30% to 45%. The government intends on removing the separate class election available for computer equipment beginning in 2005 as it feels that this provision is no longer necessary given the higher write-off rates. The government feels that these new rates better reflect the true useful lives of the equipment.

For the same reasons, data network infrastructure equipment, otherwise included in schedule 8, acquired after March 22, 2004 can be written off at a 30% rate.

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