Productivity Mega Deduction and Scientific Research & Experimental Development Changes
Canada has announced a significant expansion of tax incentives for business investment, alongside recently enacted changes to the Scientific Research and Experimental Development (SR&ED) program.
Proposed Productivity Mega Deduction
On September 15, 2026, the federal government proposed the Productivity Mega Deduction. The measure would generally allow businesses to immediately deduct the cost of most depreciable property acquired on or after September 15, 2026, once the property becomes available for use.
The proposal builds on the immediate-expensing measures announced in Budget 2025. The government estimates that approximately two-thirds of capital investment would be eligible for immediate expensing under the expanded rules.
The measure would be broad, but not universal. Specific exclusions include certain buildings, goodwill, franchises and licences, certain vehicles and other prescribed property. Manufacturing and processing buildings would not qualify under the new measure because of the exclusion for Class 1 buildings, although qualifying M&P buildings may continue to benefit from the separate temporary immediate-expensing measure announced in Budget 2025.
Recent SR&ED Changes
Separate changes to Canada's SR&ED program are now in effect following Royal Assent of Bill C-15 on March 26, 2026. Among the key changes:
The annual expenditure limit eligible for the enhanced 35% investment tax credit has increased from $3 million to $6 million;
The taxable-capital phase-out range for that expenditure limit has increased from $10 million-$50 million to $15 million-$75 million;
Eligible Canadian public corporations can now access the enhanced 35% credit; and
Qualifying SR&ED capital expenditures made after December 15, 2024 are once again eligible.
Planning considerations
Businesses considering investments in machinery, technology, R&D equipment or other capital assets should review how these measures may apply before committing to significant expenditures. The result can depend on the nature and CCA class of the asset, acquisition and available-for-use dates, and the interaction with other tax incentives.
The Productivity Mega Deduction is still proposed legislation and may change before enactment.
Trowbridge Professional Corporation can assist businesses in assessing the potential impact of these developments on planned Canadian investments and SR&ED activities.
Contact us today to schedule a consultation.
