Canada Proposes Permanent Immediate Expensing for Most Depreciable Business Assets

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On September 15, 2026, the Department of Finance released draft legislative proposals for the new Productivity Mega Deduction. If enacted, the measure would provide immediate expensing for most qualifying depreciable property acquired and available for use after September 14, 2026.

For qualifying property, taxpayers could generally deduct up to 100% of the capital cost in the year the property becomes available for use, rather than claiming capital cost allowance (CCA) over several years.

The measure is proposed legislation and has not yet been enacted.

What property could qualify?

The Productivity Mega Deduction is intended to apply broadly to depreciable capital property subject to the CCA rules, unless specifically excluded.

Potentially qualifying property could include:

• computers, servers and technology equipment;
• data-network infrastructure;
• manufacturing machinery and production equipment;
• tools and specialized business equipment;
• office furniture, shelving and fixtures;
• restaurant and commercial kitchen equipment;
• refrigeration and storage equipment;
• retail and point-of-sale equipment; and
• warehouse and material-handling equipment.

Some of these assets may already qualify for immediate expensing under previously announced measures. The Productivity Mega Deduction would make immediate expensing permanent and extend it to a substantially broader range of depreciable property.

Canadian development expenses incurred after September 14, 2026 would also be eligible under the proposal.

Property excluded from the proposed measure

Certain property is specifically excluded:

Qualifying manufacturing and processing buildings may continue to benefit from the separate temporary immediate-expensing measure announced in Budget 2025.

Vehicles are subject to specific rules based on vehicle type, CCA classification, whether the vehicle is new or used and, in certain cases, where it was assembled. Vehicle purchases should therefore be reviewed separately.

What about used equipment?

Previously used property may qualify, but generally only where:

• neither the taxpayer nor a non-arm’s-length person previously owned the property; and
• the property was not transferred to the taxpayer on a tax-deferred rollover basis.

Accordingly, transferring existing equipment between related parties on a tax-deferred basis would generally not provide access to the proposed immediate-expensing deduction.

When can the deduction be claimed?

The timing of the deduction depends not only on when an asset is purchased, but also on when it becomes available for use.

For example, equipment purchased in December but not delivered, installed and ready for use until January of the following year would generally not become eligible for the deduction until the following taxation year.

Example

Assume a corporation purchases $250,000 of qualifying production equipment on September 30, 2026. The equipment is installed and available for use in November 2026.

Assuming the equipment otherwise qualifies, the corporation could generally claim up to the full $250,000 cost in that taxation year under the proposed immediate-expensing rules.

The measure therefore accelerates the timing of the tax deduction. It does not provide an additional economic deduction or reimbursement of the purchase price.

The deduction would operate within the existing CCA system, meaning that normal concepts such as undepreciated capital cost, recapture and terminal losses would continue to apply.

Special limitation for individuals and certain partnerships

Individuals and partnerships with individual members would be subject to an additional restriction.

The immediate-expensing deduction would generally not be permitted to create or increase a loss from the business or property in which the asset is used.

What should businesses do now?

Businesses planning equipment, technology or other capital expenditures should consider reviewing their 2026 and 2027 capital spending plans.

In particular, purchases being contemplated around the September 15, 2026 effective date should be reviewed to determine whether the timing of acquisition and the date the property becomes available for use could affect the available deduction.

K&P CPAs can assist with reviewing planned capital purchases, confirming the applicable CCA classification and modelling the tax impact of the proposed immediate-expensing rules.

This update is based on draft legislative proposals released by the Department of Finance on September 15, 2026. The legislation may change before enactment. The tax treatment of a particular asset depends on its facts and CCA classification, and the examples above are intended as general guidance only.