Businesses cannot treat the draft measure as currently claimable
Budget 2026 includes a proposed Productivity Mega Deduction that could allow taxpayers to deduct up to the full eligible cost of qualifying business property when it becomes available for use.
The measure was originally proposed, with draft legislative amendments, on September 15, 2026. It was then included in Budget 2026’s business incentive package on November 5, 2026.
However, the supplied official sources do not establish that the amendments have been enacted or that the deduction can currently be claimed. The acquisition and expense dates described by the government are proposed dates, not a verified enacted effective date.
How the proposed deduction would work
The proposal covers a broad range of depreciable capital property that is subject to the capital cost allowance rules. A taxpayer could claim an amount up to the maximum permitted by the proposed rules, after applying the relevant eligibility conditions and exclusions.
Immediate expensing would mean deducting the eligible cost in the taxation year the property becomes available for use. The deduction is not described as mandatory, and acquiring or paying for an asset would not by itself establish the taxation year in which the deduction could be taken.
If a taxpayer claimed the immediate-expensing deduction for property in a taxation year, the taxpayer could not also claim another capital cost allowance deduction for that same property in that year.
The government describes the proposal as permanent, but that description remains conditional on the draft amendments being enacted.
Important proposed dates
| Date | What it means |
|---|---|
| September 15, 2026 | The government published the proposal and draft legislation. This is also the proposed general acquisition date for qualifying depreciable property and the proposed expense date for qualifying Canadian development expenses. |
| November 5, 2026 | Budget 2026 documents and notices of ways and means motions were tabled, and the Budget Day speech included the proposal in the business incentive package. |
| November 4, 2025 | A separate proposed acquisition date applies to eligible Class 47 liquefaction equipment used in liquefied natural gas facilities. |
September 15, 2026 is not a verified enacted effective date. Even if property was acquired on or after that date, it would still have to meet the other proposed rules and would generally become deductible only when available for use.
What could qualify
The general proposal would cover most depreciable property acquired on or after September 15, 2026, unless the property falls within an excluded category or fails another condition.
Qualifying Canadian development expenses incurred on or after September 15, 2026 would also be eligible under the proposal.
Previously used property would not automatically be disqualified, but it could qualify only if specified conditions were met. These include restrictions related to:
- previous ownership by the taxpayer;
- previous ownership by a non-arm’s-length person; and
- tax-deferred transfers.
The government estimates that about two-thirds of investment in capital assets would be eligible. This is a broad economic estimate, not a rule that guarantees any particular business will qualify for that percentage of its purchases.
Major proposed exclusions
The draft rules would not cover every business asset. Identified exclusions include:
- specified buildings and additions in capital cost allowance Classes 1 and 3;
- Class 14 and 14.1 property, including franchises, licences and goodwill;
- Class 51 property, including regulated natural gas distribution pipelines;
- certain vehicles in Classes 10 and 10.1;
- property depreciated under Schedules V and VI of the Income Tax Regulations; and
- specified mineral mine and timber rights addressed by the draft exclusions.
Manufacturing and processing buildings would not qualify under the Productivity Mega Deduction. The government backgrounder instead refers to separate temporary immediate-expensing treatment announced in Budget 2025.
Class 47 LNG liquefaction equipment would also be subject to separate proposed rules and timing. Property that does not qualify for immediate expensing would generally remain subject to the existing temporary Accelerated Investment Incentive under the proposal.
Limits for individuals and some partnerships
For individuals and partnerships that are not eligible corporate partnerships, the proposed deduction would be limited to income from the relevant business or property. It could not be used to create or increase a loss from that business or property.
This restriction means that the maximum deduction available under the proposal could depend not only on the asset’s eligible cost but also on the taxpayer’s circumstances.
Why the available-for-use date matters
Consider a business that acquires qualifying property on or after the proposed September 15, 2026 acquisition date, but the property does not become available for use until a later taxation year. Under the proposal, the immediate deduction would generally be considered in that later taxation year, not simply in the year the property was ordered, purchased or paid for.
This example does not determine whether a particular asset qualifies. Classification, exclusions, ownership history and other restrictions would still have to be considered.
Do You Need to Do Anything?
The official material does not establish a general new application form, claim process or CRA administrative procedure. Businesses should not treat the announcement or draft legislation alone as confirmation that the deduction is currently available.
If the proposal is enacted, a taxpayer would need to determine:
- the property’s capital cost allowance class;
- whether the property is excluded;
- when the property was acquired;
- when it became available for use; and
- for previously used property, whether the ownership and tax-deferred-transfer restrictions are satisfied.
Under the draft rules, a taxpayer seeking to exclude Class 10.1 property from immediate-expensing treatment could elect in the income tax return filed by the filing due date for the taxation year in which the property was acquired. Final forms and reporting instructions have not been established by the supplied sources.
Bottom Line
The proposed Productivity Mega Deduction could allow up to the full eligible cost of qualifying property to be deducted when the property becomes available for use. It would generally apply to eligible depreciable property acquired on or after September 15, 2026, as well as qualifying Canadian development expenses incurred on or after that date.
Those dates and rules remain proposals. The supplied official sources do not establish Royal Assent, enacted implementing legislation or regulations, or current availability of the deduction. Whether a particular purchase qualifies would depend on the final law and facts such as asset classification, acquisition date, previous use, ownership history and available-for-use timing.
Official Government Sources
- November 5, 2026 remarks by the Minister of Finance and National Revenue
- Draft Income Tax Act and Income Tax Regulations amendments
- Department of Finance backgrounder on the proposed Productivity Mega Deduction
- Income Tax Act
- Income Tax Regulations
This article provides general information based on official Canadian government sources. Government programs, amounts, eligibility rules and deadlines can change. Check the official sources linked above for information specific to your situation.