The federal government has changed how companies write off capital spending, with a permanent immediate-expensing rule meant to speed business investment and lower the cost of new projects.
The Productivity Mega Deduction Explained
On September 15, 2026, Prime Minister Mark Carney announced the Productivity Mega Deduction at the Canada Investment Summit. Companies can expense 100 percent of the cost of most depreciable capital property, and of Canadian development expenses, in the year the cost is incurred. The measure replaces the earlier Productivity Super-Deduction, which business groups treated as too narrow. Making the write-off permanent is meant to give firms a planning horizon for multi-year plants and technology projects.
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Economic Impact and Marginal Tax Rates
Analysts say the change would cut Canada’s marginal effective tax rate on new business investment from 13 percent to 6.4 percent. Ottawa has set aside $36 billion over five years, from 2026–27 to 2030–31, to support the shift. The share of capital investment that qualifies is expected to rise from about 15 percent to more than 65 percent. Manufacturing, energy, technology, and infrastructure are all in that wider net.
Streamlining Major Project Certainty
The Canada Revenue Agency also changed how it handles the largest files. From September 14, 2026, it gives priority to advance income tax ruling requests for investments of $1 billion or more. Faster rulings are meant to shorten the wait before a company commits that capital. The administrative change sits beside the wider problem described in Canada’s tax system complexity and CRA administration.
Implementation and Strategic Goals
The rules are being phased in so companies can build them into the next fiscal year. The stated aims are:
- Faster write-offs, so cash comes back to the firm sooner.
- A lower tax cost for Canadian industry against other countries.
- Less delay for companies planning large projects.
- More spending on Canadian development expenses.
- Tax rules pointed at higher productivity, not only at short-term relief.
What Businesses Are Watching
Immediate expensing and faster rulings answer two complaints at once: the cash tied up in a new asset, and the wait for a binding tax answer. The fiscal cost is large. The government’s case is that higher investment will outweigh it. The open question is whether mid-sized firms, not only the largest, can actually use the ruling priority and the full write-off. Personal accounts are a separate problem, covered in TFSA contribution penalties for people who live abroad.
Frequently Asked Questions
When did the immediate expensing rules take effect?
They apply to most depreciable capital property and Canadian development expenses acquired or incurred on or after September 15, 2026.
What is the main aim?
To raise business investment by cutting the marginal effective tax rate and by giving faster tax rulings on the largest projects.
What counts as a major project for a priority ruling?
The CRA gives priority to advance income tax ruling requests for investments of $1 billion or more.
