Canadian farmers considering machinery, equipment or imported purchases have two measures to examine before signing contracts or filing customs documents.
The first is the proposed Productivity Mega Deduction announced September 15. It would allow businesses, including farms, to immediately expense most eligible depreciable property acquired on or after that date.
Immediate expensing means deducting the eligible capital cost in the year an asset becomes available for use, rather than claiming capital cost allowance over several years. This can reduce taxable income sooner and improve an investment’s after-tax economics.
Farm machinery, equipment, freight trucks and qualifying non-passenger vehicles may be eligible. However, the federal backgrounder contains important exclusions. Buildings and additions in capital cost allowance classes 1 and 3 are not eligible under the new permanent measure, nor are certain vehicles, franchises, licences, goodwill and other specified property.
Used property may qualify only if neither the taxpayer nor a non-arm’s-length person previously owned it and the transaction is not completed through a tax-deferred rollover.
Individuals and partnerships with individual members will also be subject to rules that prevent the deduction from creating or increasing a business loss.
The measure is a proposal, and eligibility depends on an asset’s capital cost allowance class, acquisition date, available-for-use date and ownership history. Farmers should have their accountant confirm treatment before assuming they can fully deduct a purchase.
A tax deduction does not make an unnecessary machine profitable. It changes the timing of the deduction, not the purchase price or cash payment. Producers should still test investments against expected use, labour savings, repair costs, financing and projected farm income.
The second development involves relief from Canadian surtaxes on certain U.S. goods. Canada introduced counter-tariffs of 15, 25 and 50 percent on selected American products effective September 8.
Although beef remains outside the direct tariff dispute, farms may face indirect costs when buying equipment, components or materials from the United States.
A federal remission order may waive surtaxes on qualifying non-steel goods imported into Canada for agricultural production. It may also cover specified goods used in manufacturing, processing or food and beverage packaging through June 30, 2027.
Classification matters. Goods made from steel are not necessarily classified as steel goods for customs purposes. The Canadian Cattle Association notes that agricultural equipment classified under Chapter 84 of the Customs Tariff may qualify as non-steel goods. In contrast, steel products under Chapters 72 and 73 are subject to different rules.
Eligible duties can be waived at importation when you use the correct authorization code and documentation. Businesses that have already paid surtaxes may be able to request remission or a refund under CBSA procedures.
Farmers should not rely on a product description alone. The tariff classification, end use, import date and supporting records determine eligibility. Before importing, producers should ask their customs broker or the CBSA to confirm the classification and remission requirements.
These measures can create savings but affect different costs. Immediate expensing affects the timing of income tax payable on eligible capital investments. Tariff remission may remove surtax charges from qualifying imported goods.
For producers planning purchases, practical steps include identifying the asset, confirming its tariff and capital cost allowance classifications, comparing Canadian and imported net prices, and consulting the appropriate advisers before committing. •
— By Harry Siemens
