A New Incentive for Business Investment in Canada
On September 15, 2026, the Government of Canada announced the proposed Productivity Mega Deduction, a new tax measure designed to encourage business investment, improve productivity, and strengthen Canada’s competitiveness. If enacted, the measure would permanently allow businesses to immediately expense the cost of most eligible depreciable capital assets in the year they become available for use.
Productivity Mega Deduction at a Glance
- Allows businesses to deduct the full cost of eligible investments in the year they become available for use, for most eligible depreciable property acquired on or after September 15, 2026.
- Expands the immediate expensing measures introduced in Budget 2025.
- Intended to improve cash flow, encourage investment, and support long-term growth.
What Does It Mean for Businesses?
Under Canada’s existing capital cost allowance (CCA) system, businesses generally deduct the cost of capital assets over several years. The proposed Productivity Mega Deduction would allow taxpayers to claim the full cost of eligible depreciable capital assets in the year the asset becomes available for use, accelerating tax relief and enhancing cash flow.
The measure would apply to most depreciable property, including machinery, equipment, technology, and other productive assets acquired on or after September 15, 2026. Certain property types, such as most buildings, goodwill, franchises, licences, and select vehicle classes, would remain subject to existing tax depreciation rules.
Businesses considering significant capital investments should assess whether planned purchases may qualify under the proposed rules and evaluate the potential impact on their tax planning and investment decisions.
Looking Ahead
The Productivity Mega Deduction represents a significant change to Canada’s tax depreciation framework and could have a meaningful impact on the timing and cost of business investment decisions.
If you have any questions regarding the foregoing and how it may affect you or your business, please contact your LCA Advisor.