WHAT WAS ANNOUNCED
Canadian government just introduced something called the Productivity Mega Deduction.
It sounds like it is for big businesses only, but there is a practical benefit here for regular Canadian small business owners.
Under the proposed rules, businesses will be able to immediately write off the full cost of most depreciable capital assets acquired on or after September 15, 2026, once they are available for use.
This is also being put forward as a ‘permanent’ measure, not something applicable on purchases within a specific time period … but, as we know, any such measures can be changed under a different political environment and/or leadership at a later date.
WHY IT MATTERS
The measure, quite plainly, is to incentivize investing and building in Canada, not just for Canadian companies, but global companies to build here in Canada. The chart below (from the linked source above) compares the marginal effective tax rate (i.e. tax imposed on an additional dollar of business investment - as a comparable indicator of tax competitiveness across countries) between Canada and other countries after this change.
Normally, if your business buys a capital asset, you don't deduct the whole cost right away. You claim Capital Cost Allowance (CCA) over several years.
The new rules would let businesses claim a 100% deduction in the first year for a much broader range of assets.
For a typical small business, that could include things like computer equipment, purchased software, machinery, tools, equipment, furniture and other qualifying depreciable assets.
WHAT IS EXCLUDED & WHAT ABOUT BUYING USED ASSETS
Most building purchases and building additions are excluded. Goodwill, franchises and licences are being generally excluded as well. Certain passenger vehicles and other vehicles in Classes 10 and 10.1 are excluded, although there is an exception proposed for certain new vehicles assembled in Canada.
Used property can qualify, provided:
the property cannot previously have been owned by you or a non-arm's-length person; and
it cannot have been transferred to you through a tax-deferred “rollover”.
Note that even if your purchase does not qualify under the new immediate expensing rules, you would continue to receive an enhanced first year deduction under the Accelerated Investment Incentive program, where applicable.
WHAT TO DO NEXT
Don’t buy something you weren’t planning to buy. Just because it’s a “write-off” does not mean you should spend the money.
But, if your business was already planning a meaningful capital purchase, whether it is new technology, equipment, machinery or another major asset, the timing is now worth discussing with our team. If the investment already makes business sense, getting the tax deduction much sooner is a nice bonus.
ONE LAST THING
These rules have been proposed and draft legislation has been released, but they are not yet enacted law. We will be watching the legislation as it works its way through the process.
Power to you,
Think Team 🙏
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