How Your Site Investigation Costs Can Save You Money: a Tax Lesson.

Oct 26, 2017

A site investigation is a necessary part of expanding facilities, buying new commercial property or constructing a new building altogether. Their purpose is to ensure a potential building site is safe for all potential users/occupants and that any and all environmental concerns are mitigated.  Cambium has decades of experience performing environmental site assessments, records of site conditions, groundwater assessments, soil testing etc.  Our team has worked with a number of developers, planners, businesses and individuals to support the development of projects.

The cost for site investigations can feel like an added expense on top of the costly build project, regardless of the importance and necessity.  However, you might be interested to know that there are some interesting tax implications that allow you to write off these costs.

For those of you familiar with Canada’s tax system, see the below paragraph. For those that wish to know a little more to understand the benefits – read on! If you run a business or represent a business’s interest, you are well aware of the ever-looming cost that is the income tax. Most Canadian businesses are taxed at a flat rate on their taxable net income. Taxable net income in its simplest form is essentially just business revenues fewer expenses that are allowed to be deducted by the Income Tax Act (ITA). The lower your net income is, the lower your tax liability will be. However, any expenses that are capital in nature (i.e. have a long-term useful life, usually defined as more than a year) are not allowed to be deducted and must use a prescribed amortization rate provided by Canada Revenue Agency known as the Capital Cost Allowance (CCA). This means that instead of being able to reduce net income for tax purposes in a given year all at once from a capital expenditure, a business must amortize the cost over its useful life. Due to the time value of money, a dollar today is worth more than a dollar in the future – so expensing costs now is better than doing so in the future.

Normally site investigation fees would be considered capital in nature and not deductible for income tax purposes.  However, an exception to this general rule is provided for any expenses incurred for site investigations. Expenses include subsurface investigations, surveying, investigating permits, performing site assessments etc. The Tax Act essentially allows any fee related to investigating the usefulness or viability of a property as tax-deductible – even if the taxpayer does not end up acquiring the property! What does this mean for you?  You can expense the entire cost of Cambium’s services for any site investigation – saving quite a bit in tax costs!


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