The 2019 federal budget introduced two new capital cost allowance classes (class 54 and class 55) providing an accelerated write-off of 100 per cent of the purchase price for new zero-emission vehicles purchased on or after March 19, 2019, and made available for use before 2024. This accelerated write-off is to be phased out between 2024 and 2028, and the write-off of zero-emission passenger vehicles is capped at $55,000 per vehicle.
The current definition of zero-emission vehicle used for classes 54 and 55 refers to an automotive vehicle designed or adapted to be used on highways and streets.
On March 2, 2020, the federal government proposed an amendment to add a third class providing an accelerated write-off of 100 per cent of the purchase price for eligible zero-emission automotive equipment and vehicles that currently do not meet the definition used in classes 54 or 55. The automotive equipment and vehicles would be included in new Class 56. The government intends, at an early opportunity, to introduce in Parliament a legislative proposal to implement the amendment.
To be eligible for this enhanced first-year allowance, a vehicle or equipment must be automotive (i.e., self-propelled) and fully electric or powered by hydrogen. Vehicles or equipment that are powered partially by electricity or hydrogen (e.g. hybrid vehicles and vehicles that require human or animal power for propulsion) would not be eligible.
Class 56 would apply to eligible zero-emission automotive equipment and vehicles that are acquired on or after March 2, 2020, and that become available for use before 2028, subject to a phase-out for equipment and vehicles that become available for use after 2023 (as shown in Table 1). A taxpayer would be able to claim the enhanced allowance in respect of an eligible zero-emission automotive equipment or vehicle only for the taxation year in which the equipment or vehicle first becomes available for use.
Table 1. Rates for the enhanced first-year allowance
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Capital cost allowance would be deductible on any remaining balances in Class 56 on a declining-balance basis at a rate of 30 per cent. An election would be available to forgo Class 56 treatment and instead include property in the class in which it would otherwise be eligible.