Canada Unveils 'Productivity Mega Deduction' to Boost Business Investment
The Government of Canada has introduced the Productivity Mega Deduction, a major tax reform allowing immediate expensing for over 65% of eligible business assets and lowering the marginal effective tax rate on new investment to 6.4%.
On September 29, 2026, the Government of Canada announced the introduction of the "Productivity Mega Deduction" in Barrie, Ontario. The federal government describes this measure as one of the most significant changes to the business tax system in half a century.
The new deduction allows businesses to immediately deduct the full cost of a much broader range of investments. This change increases the percentage of eligible assets for immediate expensing from roughly 15% to more than 65%. Eligible investments under the new rules include fibre-optic cable, greenhouses, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft and vehicles, patents, rail track, bridges, and roads.
In addition to expanding eligibility, the federal government is making immediate expensing permanent to provide long-term certainty for major investment decisions. These changes are projected to reduce the marginal effective tax rate on new business investment from roughly 13% to 6.4%. The government states that this new rate is the lowest among major economies and less than half the rate in the United States.
Over a five-year period, government capital investments and incentives totalling about $280 billion are expected to enable more than $1 trillion in total investment from public, private, and institutional partners. The initiative aims to lower the cost of investing in Canada, drive growth and productivity, attract foreign direct investment, and create good jobs in communities across the country.
Minister Evan Solomon is scheduled to visit a local business in Cambridge, Ontario, on Thursday, October 1, 2026, at 10:30 a.m. to highlight the Productivity Mega Deduction.