Federal Budget 2026 for Business Owners

Reviewed by HJ Wu & Company Inc. (CPA) on November 5, 2026. Editorial policy. General information, not advice.

Federal Budget 2026 for business owners

Productivity Mega Deduction

• Eligible investments acquired on or after September 15, 2026 can be fully deducted in the year they become available for use, instead of being written off slowly over several years.
• The government says about two thirds of capital assets will qualify, up from about 15% before. It names equipment, tools, office technology, software, research and development, and construction vehicles, among others. Some long-lived assets, assets with regulated rates and assets with significant personal use are excluded.
• It is meant to be permanent. The government estimates it will cost about $36 billion over five years and lower the tax on a new investment from about 13% to 6.4%.
• What to do: before a big purchase, talk to us about timing and which assets qualify. The details will matter.

Starting, selling and reinvesting

• Canada Growth Incentive: a new capital gains exemption of up to $15 million per person, per business, for qualifying shares issued on or after Budget Day and before 2037. The shares must be in a Canadian-controlled private corporation and held at least 36 months. Many sectors are excluded (see the lawyer and healthcare sections below).
• Rollover for small business investments: more time to reinvest (the year of sale plus three more years, up to five with a SAFE-type agreement) and a looser active-business test. Proposed for sales on or after January 1, 2027.
• Taxable preferred shares: dividends from Canadian-controlled private corporations would be exempt after Budget Day, and the dividend allowance rises from $500,000 to $1.5 million.
• Corporate tax elections: no more certified copy of the directors’ resolution when filing certain elections.

Instalments, penalties and CRA rules

• Instalment threshold: up from $3,000 to $7,500 of tax owing for corporations and for individuals outside Quebec, for tax years beginning on or after January 1, 2028.
• One annual instalment: individuals whose main income is from a business (including professional income) could pay a single instalment of two thirds of their tax by December 31 instead of four. Proposed from 2028.
• Penalties: older fixed-dollar penalties would go up by two or three times, then be indexed every five years. Medium corporations (over $10 million up to $50 million of taxable capital) would pay three times the base amount and large ones eight times. Individuals and smaller corporations stay at the base amounts.
• Disputing an assessment: the deadline to file a notice of objection would move to one year after the notice of assessment for most taxpayers. Individuals would get the later of one year and two years from the return due date.
• Tax debts and credit bureaus: the CRA could report tax debts over $50,000 to credit bureaus, but only after objection and appeal rights have run out, 30 days’ written notice, and reasonable collection steps. GST/HST debts too.
• More CRA compliance work: $116.5 million over four years, aimed at non-filers, trust filers and corporate refund checks.
• Interest deductibility (EIFEL) rules: exceptions for purpose-built rental housing and regulated energy utilities would be widened.
• Repeated failures: new penalties that roughly double the base penalty for repeatedly failing to file forms (when you were penalised for the same failure in any of the three prior years and did not fix it after a CRA notice). The penalty changes would apply to tax years and fiscal periods ending after 2027.
• Foreign property reporting (T1135): the filing threshold would double from $100,000 to $200,000 of specified foreign property, and the simplified reporting limit would rise from $250,000 to $500,000, for tax years ending after 2026.
• Selling Canadian real property (non-residents): lower withholding and remittance rates for corporate vendors (for example from 25% to 15% on most capital property), for dispositions on or after January 1, 2027.
• No rate changes: we did not see any personal or corporate income tax rate changes in the tax measures.

Other business items

• A $930 million expansion of SR&ED commercialisation and $1 billion for the Strategic Response Fund.
• Federal fuel excise tax relief runs to the end of January 2027, then half the normal rates until the end of March 2027, then back to normal on April 1, 2027.
• New telecom rules would end fees to activate, change or cancel plans.
• Plans to better line up the Temporary Foreign Worker Program with labour market needs. Details are still to come.

More on Budget 2026

• Budget 2026 hub: summary, key numbers and dates
• For business owners
• For lawyers and law firms
• For doctors, dentists and clinics
• For individuals and families
• The official budget at budget.canada.ca

Key takeaway: The Productivity Mega Deduction, instalment and penalty changes, rollover rules, CRA compliance and fuel and EI updates for business owners.

Official sources

• Budget 2026: Masters of our destiny (budget.canada.ca)
• Department of Finance Canada
• Canada Revenue Agency

Reviewed November 5, 2026. This is general information, not legal or tax advice. Rules and rates change, so confirm current requirements with the official sources above and speak to the firm about your situation.