Waiting to upgrade your technology? Don't
A new government tax incentive means now is the time to buy
By Mark Lorne
April 1, 2009
April 1, 2009
Stephen Harper’s January budget may have been born out of political necessity, but from that tumult came at least one business initiative of great value: a temporary measure that allows business taxpayers to fully write off computer investments. The change centres on the Capital Cost Allowance (CCA), the percentage of a capital asset’s cost a business may deduct each year for tax purposes. Budget 2009 increases the CCA rate to 100 per cent for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011.
Previously, businesses could only write off 55 per cent of a technology investment, at a rate of 50 per cent per year. In subsequent years, the write off diminished as the remaining balance decreased. So the tax benefit, in the first year, was effectively 27.5 per cent of the total. If a company spent $10,000, it claimed $2,750 in the first year. The claim in the second year was based on the remaining balance of $7,250, and that amount diminished annually.
Budget 2009, therefore, will deliver a double benefit: first, it allows a company to write off an entire investment and, second, it can do so in the first year.
Eligible purchases include system software, computers and ancillary equipment such as monitors, printers and even keyboards. Not all office equipment is included, so consult a certified accountant before proceeding.
Act now
This initiative delivers a direct benefit to Canadian businesses, said Peter Coles, a tax research and training specialist with H&R Block. “We are already advising clients to take advantage of this. For example, if a company is thinking of buying computers but had decided to hold off until after the recession, that is not a good decision. Business people should consider buying the equipment now.”
The current economic situation has also created a buyer’s market, and product bundles and rebate offers can substantially decrease the cost of acquisition. When negotiating prices, look for accessories with notebooks, or extra paper trays included with a multifunction printer.
Buying advice
For those intrigued by the deals from sellers and the Federal government, here is some advice for your bargain hunting.
Notebooks: Price tags of $600, or even less, are attractive but it’s a good idea to spend a little more on business notebooks. Look for computers that start at around $1,200. For that price you’ll give employees faster processors, more storage and lighter notebooks.
And don’t dismiss that last factor. Studies show notebook users are significantly more productive than desk-bound counterparts; a study conducted by UTech Consulting concluded the “average increase in employee productivity (number of hours worked) realized through the use of a notebook PC is 7.7 additional hours per week.” But those advantages are only realized when employees actually carry their computers.
LCD monitors: However, notebooks tend to sport smaller screens and habitually looking down at a monitor is ergonomically unsound. So consider purchasing add-on LCD monitors. The current sweet spot between size and price is 19-inch widescreen units. These cost less than $200 yet provide lots of room to edit spreadsheets.
Multifunction printers: Purchasing, managing and buying supplies for workplace printers consumes five per cent of the typical IT budget, according to Gartner. The culprit is often too many printers: Gartner concluded that sharing printers among up to 15 people reduces ink and toner costs by 70 per cent and paper costs by 67 per cent. Invest in a workgroup multifunction unit that can act as a printer, copier, fax machine and scanner. And remember: laser technology is cheaper per page than inkjet.
Along with a number of other worthwhile investments (wireless networking, peripherals, updated security and application software), now is clearly the time to upgrade your workplace technology.
SIDEBAR
Investing $10,000 in technology
Old tax rules:
> $2,750 write off in the first year
> annual diminishing-balance deductions afterward
New tax rules:
> $10,000 tax write off immediately
Mark Lorne is general manager, technology, Grand & Toy
Previously, businesses could only write off 55 per cent of a technology investment, at a rate of 50 per cent per year. In subsequent years, the write off diminished as the remaining balance decreased. So the tax benefit, in the first year, was effectively 27.5 per cent of the total. If a company spent $10,000, it claimed $2,750 in the first year. The claim in the second year was based on the remaining balance of $7,250, and that amount diminished annually.
Budget 2009, therefore, will deliver a double benefit: first, it allows a company to write off an entire investment and, second, it can do so in the first year.
Eligible purchases include system software, computers and ancillary equipment such as monitors, printers and even keyboards. Not all office equipment is included, so consult a certified accountant before proceeding.
Act now
This initiative delivers a direct benefit to Canadian businesses, said Peter Coles, a tax research and training specialist with H&R Block. “We are already advising clients to take advantage of this. For example, if a company is thinking of buying computers but had decided to hold off until after the recession, that is not a good decision. Business people should consider buying the equipment now.”
The current economic situation has also created a buyer’s market, and product bundles and rebate offers can substantially decrease the cost of acquisition. When negotiating prices, look for accessories with notebooks, or extra paper trays included with a multifunction printer.
Buying advice
For those intrigued by the deals from sellers and the Federal government, here is some advice for your bargain hunting.
Notebooks: Price tags of $600, or even less, are attractive but it’s a good idea to spend a little more on business notebooks. Look for computers that start at around $1,200. For that price you’ll give employees faster processors, more storage and lighter notebooks.
And don’t dismiss that last factor. Studies show notebook users are significantly more productive than desk-bound counterparts; a study conducted by UTech Consulting concluded the “average increase in employee productivity (number of hours worked) realized through the use of a notebook PC is 7.7 additional hours per week.” But those advantages are only realized when employees actually carry their computers.
LCD monitors: However, notebooks tend to sport smaller screens and habitually looking down at a monitor is ergonomically unsound. So consider purchasing add-on LCD monitors. The current sweet spot between size and price is 19-inch widescreen units. These cost less than $200 yet provide lots of room to edit spreadsheets.
Multifunction printers: Purchasing, managing and buying supplies for workplace printers consumes five per cent of the typical IT budget, according to Gartner. The culprit is often too many printers: Gartner concluded that sharing printers among up to 15 people reduces ink and toner costs by 70 per cent and paper costs by 67 per cent. Invest in a workgroup multifunction unit that can act as a printer, copier, fax machine and scanner. And remember: laser technology is cheaper per page than inkjet.
Along with a number of other worthwhile investments (wireless networking, peripherals, updated security and application software), now is clearly the time to upgrade your workplace technology.
SIDEBAR
Investing $10,000 in technology
Old tax rules:
> $2,750 write off in the first year
> annual diminishing-balance deductions afterward
New tax rules:
> $10,000 tax write off immediately
Mark Lorne is general manager, technology, Grand & Toy
