Ottawa announces wider immediate tax deductions for business investment
The federal government has introduced a Productivity Mega Deduction that would let businesses immediately deduct the full cost of a wider range of eligible investments. The government says the change expands the share of assets eligible for immediate expensing from roughly 15% to more than 65%, and makes immediate expensing permanent.
Businesses considering investments in software, computer equipment, research and development, infrastructure and other assets could be affected. The measure matters to Canadian AI readers because software and computer equipment are included, though the release does not set out any AI-specific measures.
A wider range of investments can qualify for immediate deductions
The Government of Canada announced the Productivity Mega Deduction on October 1, 2026. It says businesses will be able to deduct the full cost of a much broader range of eligible investments in the first year an asset is available for use. The government says eligible assets will grow from roughly 15% to more than 65%.
Its examples include software, research and development, computer equipment, fibre-optic cable, greenhouses, mining property, vehicles, patents, rail track, bridges and roads. The government also says it is making immediate expensing permanent. The announcement presents the measure as a way to encourage investment and business growth.
The release describes the tax change and its projected rate
The release explains that Canada’s capital cost allowance system lets taxpayers deduct the cost of assets that lose value over time, such as machinery and equipment. Immediate expensing would let eligible businesses deduct an asset’s full cost in the first year it is available for use, rather than over time.
The government says the changes would cut the marginal effective tax rate on new business investment, a measure of the overall tax burden on a new investment, from roughly 13% to 6.4%. It says this would be the lowest among major economies and less than half the United States’ rate. These are government projections, not reported results after implementation.
The release leaves implementation details open
The announcement does not give the effective date, eligibility rules for individual assets, or instructions for businesses claiming the deduction. It does not explain how the measure will apply to specific AI projects or report how many firms are expected to use it. The release also does not provide independent evidence that the projected tax-rate change will lead to new investment, productivity gains or jobs.
Look for the rules businesses will use
The next useful details would be official tax guidance or legislative documents explaining when the deduction takes effect and which assets qualify. Businesses and advisers will need to see how the rules treat software, computer equipment and research and development costs in practice. The release does not name a later publication date or implementation decision, so no specific timetable can be confirmed from this source.