(Updated Oct 2, 2026)
On September 15, 2026, the federal government proposed a significant expansion of Canada’s immediate expensing rules for business capital purchases, referred to as the Productivity Mega Deduction. Draft legislation was released the same day.
Under the proposal, businesses would be able to deduct 100% of the cost of most eligible depreciable property in the year it becomes available for use, rather than claiming the cost gradually over several years through capital cost allowance (CCA). The measure would apply to eligible property acquired on or after September 15, 2026, and is proposed to be permanent.
The government estimates that about two-thirds of business investment in capital assets would be eligible, compared with about 15% under the Productivity Super-Deduction announced in Budget 2025. Unlike the temporary immediate expensing rules introduced in 2021, there would be no $1.5 million annual limit.
What types of purchases could qualify?
The proposal would cover most property that is normally subject to the CCA rules. Depending on the circumstances, this could include:
- Machinery and equipment
- Computers and technology
- Software
- Furniture, tools and other business equipment
- Vehicles, subject to the restrictions noted below
- Many other depreciable capital assets
For example, if a corporation purchases $100,000 of qualifying equipment and the equipment is available for use before its fiscal year end, the corporation could potentially deduct the full $100,000 in that taxation year rather than claiming CCA over a number of years.
What does not qualify?
There are several important exclusions. The following property would not qualify under the new rules:
- Buildings, and additions or alterations to buildings, included in CCA Classes 1 and 3. This covers most commercial, industrial and rental buildings.
- Franchises, licences and other Class 14 property, and goodwill and other Class 14.1 property.
- Passenger vehicles, taxis and certain pickup trucks and vans, unless the vehicle is new and was assembled in Canada.
- Certain other specified property, such as regulated natural gas distribution pipelines.
Manufacturing and processing buildings are subject to a separate temporary immediate expensing measure announced in Budget 2025. Property that does not qualify would generally continue to be eligible for an enhanced first-year deduction under the existing Accelerated Investment Incentive. The vehicle rules are detailed, so a specific vehicle should be reviewed before it is purchased.
Used property may also qualify in some circumstances. However, it would not qualify where the property was previously owned by the taxpayer or a non-arm’s length person, or was transferred to the taxpayer on a tax deferred rollover basis.
Individuals, and partnerships with members who are individuals, would also be restricted from using the deduction to create or increase a loss. This is relevant to sole proprietors and partnerships of individuals.
What should business owners be considering?
For businesses planning significant capital purchases, timing may now be particularly important. The property must be acquired on or after September 15, 2026. The asset generally needs to be available for use before the end of the taxation year for the immediate deduction to be available in that year.
Business owners should also remember that claiming the maximum deduction immediately is not necessarily the best tax strategy in every situation. Current and expected taxable income, available losses, other deductions and the potential tax consequences when the property is eventually sold, including recapture, should all be considered.
The proposed rules are especially worth reviewing for businesses that are currently considering significant investments in equipment, technology or other capital assets.
Before making a purchase
These measures are currently proposed. Draft legislation has been released, but the rules are not yet law and may change before they are enacted. If you are considering a significant capital purchase, speak with your accountant before finalizing the timing and structure of the investment.
Stefanizzi Professional Corporation can help you determine whether a planned purchase is expected to qualify and how the proposed immediate expensing rules may affect your business.
Further details are available on the Government of Canada website:
This article is based on the draft proposals released on September 15, 2026. It is intended for general informational purposes only and does not constitute tax advice. Tax consequences will depend on the specific facts and circumstances of each taxpayer.