Wrecker or flatbed, the class question comes first
Tow trucks default into Class 10 at 30% declining balance, and for a light-duty flatbed that is usually the end of the story. A heavy wrecker deserves a second look: Class 16 at 40% exists for trucks rated over 11,788 kg gross vehicle weight that are designed and used for hauling, and where a unit's rating and its actual work genuinely fit, the faster class is a permanent timing advantage on the most expensive asset you own. The answer turns on the GVWR plate and what the truck does all day, so we document the position when the truck is bought, not when the CRA asks.
Timing is the second dial. The half-year rule stays suspended for equipment available for use before 2028, so a unit put to work ahead of your fiscal year-end claims its full first-year rate, and a used truck qualifies as long as it is new to your corporation. One caution before any truck is sold: years of CCA can pull a wrecker's tax value well below what the used market pays, and proceeds above the class pool come back into income, so disposals get modelled before they get signed.
The compound is depreciable property, line by line
The yard earns storage revenue every day, and most of what makes it a yard is depreciable, though almost never as one number. Broken out properly:
- Fencing sits in Class 6 at 10%, and for an impound compound the fence is not a small line.
- Paving and gravel surfacing belong in Class 17 at 8%.
- Cameras, gate hardware, lighting and yard equipment take Class 8 at 20%, with dispatch computers in Class 50 at 55%.
- A yard office building depreciates slowly in Class 1, and the land under everything not at all.
- On a leased yard, what you build becomes a Class 13 leasehold improvement, written off straight-line over the lease.
Operators tend to either expense these costs and invite an audit adjustment, or bury them and claim nothing. Classifying them correctly is the money in the middle, and it also sets the right cost base for the day the yard itself changes hands.
The Quick Method looks friendly until you price the fuel
Towing companies under the $400,000 eligibility ceiling sometimes ask about the Quick Method, and the honest answer usually comes from the fuel line. The comparison that decides it:
| Decision point | Regular method | Quick Method |
|---|---|---|
| What you remit | The 13% you charged, minus input tax credits | 8.8% of tax-included sales for an Ontario service business, with a 1% credit on the first $30,000 |
| Fuel, repairs and insurance | ITCs claimed in full | ITCs given up |
| Trucks and other capital purchases | ITCs claimed | ITCs still claimed on capital assets |
| Who it tends to suit | Fuel-heavy operations, which is most towing | Service firms with thin input costs |
Diesel and repairs are exactly the costs the Quick Method makes you eat, so for a working fleet the regular method usually wins, but the point is to decide on your numbers rather than a rule of thumb. Filing frequency is the companion choice: an annual filer whose net tax passed $3,000 pays quarterly instalments the next year, and an operator carrying slow insurer receivables is often better served matching the filing cycle to the cash cycle instead of letting a default decide it.
Reserves, pay and a year-end decided in October
Insurer and storage receivables age, and the Income Tax Act lets the return say so. A reserve for doubtful accounts deducts this year the receivables you genuinely doubt, is added back next year and re-measured, and an account fully written off deducts outright; the aged-by-insurer ledger the bookkeeping already keeps is the evidence for all of it. For a business that accrues storage daily but collects it at release, that reserve is the difference between being taxed on the yard's earnings and being taxed on its hopes.
Owner pay is the last dial, and cash discipline comes before tax cleverness: a dividend declared against receivables that have not landed is a shareholder loan problem waiting to be papered. Beyond that, profit retained in the corporation at roughly 12.2% on the first $500,000 is what accumulates toward the next truck, and the salary-dividend split gets revisited annually alongside the T2 rather than set once and forgotten. Tax Planning & Advisory runs these decisions on a calendar, with the truck-purchase math shared with Business Financing Advisory when the next wrecker needs a lender. Most of the operators we do this for run yards across Mississauga and the GTA, where the compound is often worth more than the fleet parked in it, and every fee is quoted in writing after a free 15-minute discovery call.
