Making a Major Business Purchase? New Tax Rules Could Increase Your Upfront Deduction on Capital Investments
On September 15, 2026, the federal government released draft legislation proposing a significant change to the way Canadian businesses may deduct the cost of many capital investments.
The proposed Productivity Mega Deduction would permanently allow businesses to immediately expense a broad range of eligible depreciable property acquired on or after September 15, 2026.
What does immediate expensing mean?
Businesses normally deduct the cost of capital assets over time through the Capital Cost Allowance (CCA) system. Depending on the type of asset, those deductions can be spread over several years.
Under the proposed new rules, most eligible depreciable property acquired on or after September 15, 2026 could qualify for a 100% CCA deduction in the year the property becomes available for use.
For businesses investing in equipment, machinery, computers, technology and many other capital assets, this could provide a significantly larger tax deduction in the year of investment rather than spreading the deduction over future years.
It is important to remember that immediate expensing does not reduce the actual cost of the investment. Instead, it accelerates the tax deduction that would otherwise generally be claimed over time.
Not every capital purchase will qualify
Although the proposed measure is broad, there are important exclusions.
Certain buildings, franchises, licences and goodwill, certain vehicles and some other classes of property would not qualify for the Productivity Mega Deduction.
There are also special rules for previously used property. Eligibility may be restricted where the taxpayer or a non-arm’s-length person previously owned the property, or where property has been transferred on a tax-deferred rollover basis.
Property that does not qualify for immediate expensing may still be eligible for other existing CCA incentives.
What should businesses consider?
For businesses making capital investments from September 15, 2026 onward, the new rules could make the tax treatment of those purchases considerably more favourable.
However, whether a particular purchase qualifies—and how valuable the accelerated deduction will be—depends on the type of property, its CCA classification, when it becomes available for use and the particular tax circumstances of the business.
The Productivity Mega Deduction is currently proposed legislation. Draft legislation has been released by the federal government, but the measure has not yet completed the legislative process.
Deacur Worthington & Associates Ltd. will continue to follow the progress of the proposed legislation and any related guidance as the rules are finalized.
If your business is considering a significant capital investment, speak with us about how the proposed rules may apply to your circumstances.
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