What Canada’s 2026 Federal Budget Means for Your Business

1. Deduct eligible equipment and software sooner

The budget confirms the government’s intention to proceed with the Productivity Mega Deduction. Under the proposal, businesses could deduct the full cost of eligible assets acquired on or after September 15, 2026, in the year the assets are ready to use. Depending on the purchase, this could include kitchen equipment for a restaurant, machinery for a manufacturer or software for a growing business.

A larger first-year deduction can reduce taxable income sooner. If you’re budgeting for a major purchase, check both the type of asset and when you expect it to be ready. For example, equipment delivered in December that still needs installation may only be ready to use in the following tax year.

2. Some corporations could make fewer advance tax payments

The budget proposes raising the federal corporate income tax instalment threshold from $3,000 to $7,500 for tax years beginning on or after January 1, 2028. Some small corporations could then pay their income tax balance when it’s due without making advance payments during the year.

For owners, the benefit is in cash flow. If your corporation qualifies, it could keep more cash on hand during the year to cover payroll, inventory or other operating costs. The full tax bill still comes due, so include it in your cash flow forecast and set money aside.

3. More research and development costs could qualify for tax credits

The budget proposes expanding the Scientific Research and Experimental Development (SR&ED) program for tax years beginning on or after November 5, 2026. The expansion would cover certain tests needed for a product’s first regulatory approval or certification, as well as some costs of obtaining and maintaining patent or other intellectual property protection. The costs must relate directly to a project that already qualifies for SR&ED.

For example, a manufacturer developing a new product may need to pay for certification testing before it can sell the product. If the development project qualifies, some of that testing could also qualify. Keep the invoices and a short record of which project the work relates to so you can review those costs at year-end.

4. Businesses could have a longer deadline to dispute a tax assessment

Corporations would generally have one year from the date the CRA sends an income tax assessment to file a formal objection. The proposal would also remove the ability to request an extension. The new rules would apply to assessments sent at least three months after the legislation receives Royal Assent.

If a notice shows a balance you didn’t expect or a change to a deduction you claimed, send it to your accountant promptly. An early review gives you time to gather the records, understand what the CRA changed and decide whether to object.

5. The CRA could report certain tax debts to credit bureaus

The budget proposes allowing the CRA to report qualifying tax debts over $50,000 to credit bureaus. This could apply to income tax and GST/HST debts. Before reporting, the CRA would have to make reasonable collection efforts, give the business a chance to arrange repayment and provide at least 30 days’ written notice. The taxpayer’s objection and appeal rights would also have to expire or be exhausted.

For a business that relies on a line of credit or plans to seek financing, a tax debt on its credit report could matter when a lender reviews an application. If cash is tight and a balance is growing, discuss repayment options with the CRA early.

6. Simpler reporting for some foreign investments

For tax years ending after 2026, the budget proposes raising the threshold for filing the foreign property reporting form (T1135) from $100,000 to $200,000. The threshold is based on the total cost of certain foreign property held at any time during the year. The threshold for simplified reporting would also rise to a total cost of less than $500,000 throughout the year.

This is worth checking if your corporation invests surplus cash in foreign shares or holds funds in an overseas bank account. Keep records of what the company paid for those investments so your accountant can check the reporting requirement at year-end.

These proposals may change as legislation moves forward.

If you’d like to review how the budget could affect your business, contact Bronte Bay CPA.

Read the federal government’s Budget 2026 tax measures →