Immediate expensing of M&P buildings — Manufacturing and processing buildings can be written off in full in year one

How it works

When a business buys a building it cannot deduct the cost in the year it pays. The cost goes into a capital cost allowance class and is deducted a slice at a time, over decades, through depreciation.

This change lets an eligible manufacturing or processing building be deducted in full in the first year instead — a 100% first-year deduction rather than a long schedule.

The full rate is not permanent. It applies where the building is first used before 2030, then steps down: 75% for 2030 and 2031, 55% for 2032 and 2033, and no enhanced rate after that.

At least 90% of the floor space must be used to manufacture or process goods, and the building must be new to the taxpayer. Storage, office and already-owned buildings do not qualify.

How it applies to you

Corporations that manufacture or process goods and are buying, building or expanding premises. It is a genuinely large deduction for a business in that position.

The 90% floor-space test is the trap. A production building with a large office or warehouse share can fail it: the test is how the space is used, not what the company does.

Because the deduction lands in a single year, it can push a company into a loss. That is not necessarily a problem — losses can be carried — but it changes the tax picture materially and is worth modelling rather than discovering.

How to calculate it

The deduction depends on when the building is first used:

What changed

Manufacturing and processing buildings have historically been slow write-offs. This allows the full cost in year one, falling to 75% for 2030 and 2031, 55% for 2032 and 2033, and no enhanced rate after that.

What to do

If a purchase or a build is in progress, model the timing before committing to a closing or completion date. The rate steps down on calendar boundaries, and a few weeks either side of one changes the deduction.

Confirm the 90% floor-space test with actual measurements rather than an impression of how the building is used.

A deduction this large in a single year interacts with everything else in the return — instalments, the small business deduction, and how the owner draws income. It is worth planning around rather than claiming and seeing what happens.

The terms used on this page

Capital cost allowance

The tax system’s version of depreciation: the cost of an asset deducted over time rather than all at once.

First-year deduction

The amount deductible in the year the asset is put to use.

New to the taxpayer

Not previously owned or used by you. A building you already held does not qualify.

Common questions about immediate expensing of M&P buildings

Where this comes from

Every figure on this page is taken from the source below, not from interpretation:

• Budget 2025 — Tax measures: supplementary information

General information, not tax advice. This page explains a change in general terms. It cannot account for your circumstances and does not create a professional relationship. Confirm anything that affects a decision — send an enquiry.