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Canada's 2026 federal budget, titled Masters of our Destiny, was tabled on 5 November 2026. Most of the coverage went to the deficit, defence and a new sovereign wealth fund. For a manufacturer or the owner of a process plant, the important parts are in the tax measures: how fast you can write off equipment, what counts as research, and how long the clean technology credits last.
This article sets out the measures that matter for plants and factories, what each one is worth, and what to do before year end. Several are proposals that are not yet law, so the last section explains how to plan around that.
The measures at a glance
| Measure | What it does | Applies from | Status |
|---|---|---|---|
| Productivity Mega Deduction | Write off the full cost of most equipment and other depreciable property in the year it is put in use, permanently | Property acquired on or after 15 September 2026 | Draft law, confirmed in the budget |
| Wider SR&ED | Adds testing and validation work for a first regulatory approval or certification, and the cost of patents and similar protection for IP from SR&ED projects | Tax years starting on or after 5 November 2026 | Proposed |
| Clean technology and clean electricity credits extended | The 30% Clean Technology ITC and 15% Clean Electricity ITC now cover property available for use before 2041, instead of before 2034 | Budget Day | Proposed |
| Canada Growth Incentive | A capital gains exemption of up to $15 million on qualifying new shares of Canadian-controlled private corporations, held for at least 36 months | Shares issued from Budget Day to the end of 2036 | Proposed |
| Small business rollover | A longer window, the year of sale plus three years, to reinvest gains from selling small business shares without paying tax | Sales on or after 1 January 2027 | Proposed |
1. The Productivity Mega Deduction
This is the largest change for any business that buys equipment. The government announced it on 15 September 2026 and confirmed it in the budget. Once enacted, a business can deduct 100 percent of the cost of most depreciable property in the year the property becomes available for use, rather than spreading it over many years through capital cost allowance (CCA).
It is broader than the "Productivity Super-Deduction" from Budget 2025, which applied to selected classes such as manufacturing and processing machinery. The government estimates that the Super-Deduction covered about 15 percent of business investment in capital assets and that the Mega Deduction covers about two thirds. The starting point is now that depreciable property qualifies unless it is excluded.
- What qualifies: most depreciable property acquired on or after 15 September 2026, such as production equipment, lab and test equipment, vehicles, computers and network hardware.
- What does not: buildings in CCA classes 1 and 3, and certain other property listed in the rules. Manufacturing and processing buildings keep the temporary immediate expensing introduced in Budget 2025.
- Timing: the property must be both acquired on or after 15 September 2026 and available for use in the year you claim it. Equipment that arrives in December but is not commissioned until February is claimed in the following year.
What it is worth
The deduction changes when you get the tax relief, not how much you get in total. Take a $1 million asset in a class written off at 20 percent a year on a declining balance. Under the standard CCA rules, with the half-year rule and no accelerated allowance, the first-year deduction is $100,000 and the asset takes well over a decade to write off. Temporary accelerated allowances, where they apply, narrow the gap. Under the Mega Deduction, the full $1 million is deducted in year one.
For a corporation paying the general rate of 27 percent in British Columbia, deducting $1 million in year one instead of $100,000 cuts that year's tax by about $243,000. Later years carry less CCA, so the tax comes back gradually. The benefit is cash now, which is worth most to a business that is borrowing to invest or growing fast.
Two cautions. First, a business with little taxable income, or one taxed at the small business rate, gets less value from a larger deduction. Second, selling written-off equipment later brings the deduction back into income as recapture. Run both cases with your accountant.
2. SR&ED: wider again
The Scientific Research and Experimental Development program was already improved this year. Bill C-15 became law on 26 March 2026. It doubled the expenditure limit for the enhanced 35 percent refundable credit to $6 million, raised the taxable capital range over which that limit phases out, and made capital equipment used for SR&ED eligible again. On 1 April the CRA opened an optional pre-claim approval process.
Budget 2026 proposes two additions for tax years that begin on or after 5 November 2026:
- Regulatory work. Testing, technological validation and study work needed to obtain an initial regulatory approval or certification would count as SR&ED. For a plant developing a new product, this can include the trials needed for a first certification.
- Protecting IP. The cost of obtaining and maintaining patents and similar protection would be eligible, if the IP comes from an SR&ED project.
Our article on SR&ED for engineering and software projects explains what qualifies and how to estimate a claim.
3. Clean technology credits until 2040
The refundable Clean Technology ITC (30 percent) and Clean Electricity ITC (15 percent) were due to end for property available for use after 2034. The budget extends both to property available for use before 2041. The Clean Technology ITC drops to 15 percent in its final year, now 2040. The Clean Electricity ITC also gains some large intra-provincial transmission projects.
For a plant, the Clean Technology ITC covers property such as heat pumps, solar and small hydro equipment, and certain energy storage. A longer window gives more room to plan an energy project around a turnaround instead of rushing it.
The summaries we reviewed do not show the same extension for the Clean Hydrogen ITC, which still drops to half its rate in 2034 and ends after 2034. See the Clean Hydrogen ITC, explained for plant owners.
4. Owners raising money or selling
The new Canada Growth Incentive would exempt up to $15 million of capital gains per person on qualifying shares of a Canadian-controlled private corporation issued from Budget Day to the end of 2036 and held for at least 36 months. Many industries are excluded, including consulting and professional practices, mining, utilities, real estate and finance. Manufacturing is not on the excluded list in the summaries we reviewed. The integrity rules have not been released yet.
The small business rollover, which defers tax when the proceeds from selling small business shares are reinvested, gets a longer window: the year of the sale plus three years, for sales from 1 January 2027.
What to do before year end
- List equipment bought since 15 September 2026. Note the date each item was acquired and the date it became available for use. Assets acquired before 15 September stay under the old rules.
- Plan commissioning dates. An asset commissioned on 20 December gives a deduction this year. On 5 January it gives a deduction next year. Talk to your accountant about which you want.
- Review this year's development work for SR&ED. If you are likely to claim, consider pre-claim approval for next year's projects.
- Put energy projects back on the list. With the Clean Technology ITC available until 2040 and immediate expensing for most equipment, the after-tax cost of a heat recovery or electrification project may be lower than when you last looked.
- Do not count unlegislated measures as cash yet. Model them as likely, and keep a fallback if the final rules change.
Proposed is not law
A budget proposal usually becomes law months later, sometimes with changes. The Mega Deduction has been released as draft legislation, which helps, but its details may still move. Businesses generally file on the basis of proposals the government has said it will enact. Make that call with your advisor, and keep the documents that show when each asset was acquired and put in use.
Key points
- The Productivity Mega Deduction lets most equipment acquired from 15 September 2026 be written off in the year it is put in use. It speeds up the deduction. It does not increase the total.
- SR&ED would widen again to include first regulatory approvals and IP protection costs, on top of the $6 million limit and capital eligibility enacted in March.
- The Clean Technology and Clean Electricity ITCs would run to the end of 2040. The Clean Hydrogen ITC still ends after 2034.
- Owners raising equity or selling shares get a new capital gains exemption and a longer rollover window.
Planning a capital project? Chmltech helps manufacturers and process plants build the engineering and business case for new equipment, energy projects and automation. Book a strategy call.
This article is general information, not tax or legal advice. Several measures described here are proposals that are not yet law, and the details can change before they are enacted. Confirm how they apply to your business with your accountant or tax advisor before you act on them.
Sources
- Gowling WLG: Federal Budget 2026
- Department of Finance Canada: New Productivity Mega Deduction (September 2026)
- Osler: Canadian prime minister announces Productivity Mega Deduction
- KPMG: New investment deduction expands immediate expensing
- EY: Bill C-15 receives Royal Assent
- CRA: SR&ED pre-claim approval process
