The federal government tabled its 2024 Fall Economic Statement (FES 2024) on December 16, 2024, which was delivered by the Government House Leader, Karina Gould.
FES 2024 introduces changes to various business and personal tax measures. Notably, it broadens the scope of the SR&ED program so that more businesses can access the incentive, reinstates accelerated investment incentives, and extends immediate expensing on qualifying equipment.
Given the uncertainty in Parliament, it’s unclear whether these measures will be enacted. For these tax measures to become law, at least one other party is required to vote with the Liberals for them to come into force.
FES 2024 announces a deficit of $61.9 billion and projects a deficit of $48.3 billion in 2024-2025 in the baseline projection. This is compared to a deficit of $39.8 billion projected for the same period in Budget 2024.
FES 2024 includes three scenarios for numerous economic indicators: the baseline projection, an upside scenario, and a downside scenario. The upside scenario factors in lower interest rates, lower-than-expected unemployment rates, and lower than expected inflation, while the downside scenario factors in lower commodity prices, higher than expected unemployment, and heightened global uncertainty.
The following table outlines key economic indicators in all three scenarios:
| Projected amounts | 2023-2024 | 2024-2025 | 2025-2026 | 2026- 2027 | 2027- 2028 | 2028-2029 | 2029-2030 |
|---|---|---|---|---|---|---|---|
|
Deficit— Budgetary |
($61.9B)
|
($48.3B)
|
($42.2B)
|
($31.0B)
|
($30.4B)
|
($27.8B)
|
($23.0B)
|
|
Deficit—upside scenario
|
($61.9B)
|
($46.0B)
|
($34.8B)
|
($19.5B)
|
($16.5B)
|
($15.8B)
|
($14.9B)
|
|
Deficit—downside scenario
|
($61.9B)
|
($49.7B)
|
($51.6B)
|
($41.6B)
|
($36.8B)
|
($32.0B)
|
($27.0B)
|
|
Debt as % of GDP— Budgetary |
42.1
|
41.9
|
41.7
|
41.0
|
40.2
|
39.5
|
38.6
|
|
Debt as % of GDP—upside scenario
|
42.1
|
41.8
|
40.9
|
39.7
|
38.6
|
37.8
|
37.0
|
|
Debt as % of GDP—downside scenario
|
42.1
|
42.0
|
42.8
|
42.5
|
41.7
|
40.8
|
39.9
|
FES 2024 proposes to reinstate and extend the accelerated investment incentive and immediate expensing rules for an additional three years until 2030. These measures are currently set to be fully eliminated after 2027.
The accelerated investment incentive provides an enhanced first-year capital cost allowance for most depreciable property. The FES proposes to fully reinstate the incentive for qualifying property acquired on or after January 1, 2025 and becomes available for use before 2030. This would allow 150% of the normal capital cost allowance rate to be claimed. The incentive would phase out starting in 2030 and be fully eliminated for property that becomes available for use after 2033. This proposal doesn’t include an adjustment to the currently enacted rules, which provide for claiming capital cost allowance at 100% of its normal rate for acquisitions in 2024.
FES 2024 also proposes to fully reinstate immediate expensing for manufacturing and processing machinery and equipment, clean energy generation and conservation equipment and zero-emission vehicles acquired on or after January 1, 2025, and becomes available for use before 2030. These measures would be phased out starting in 2030 and fully eliminated for property that becomes available for use after 2033. This proposal doesn’t include an adjustment to the currently enacted rules which provide for immediately expensing 75% of the cost of certain eligible capital property purchased in 2024.
FES 2024 broadens the scope of the scientific research and experimental development (SR&ED) tax incentives for eligible Canadian public corporations and CCPCs.
FES 2024 allows eligible businesses to claim more under the incentive by increasing expenditure limits to $4.5 million (from $3 million). FES 2024 also makes SR&ED incentives available to more corporations by raising the thresholds at which taxable capital decreases the availability of the refundable credits. FES 2024 states that the availability of the refundable credits is now reduced where corporations have taxable capital of $15 million to $75 million (from $10 million to $50 million).
FES 2024 also allows eligible Canadian public corporations to benefit from the enhanced refundable credit, which was previously only available to CCPCs subject to certain conditions.
A Canadian public corporation must meet the following criteria to be eligible:
A public corporation’s access to the expenditure limit will be reduced where the average gross revenue over the preceding three years is between $15 million and $75 million, considering consolidated gross revenue where consolidated statements are prepared. CCPCs would have the option to elect to have their expenditure limit reduced by gross revenues instead of their taxable capital. Members of a corporate group for financial reporting purposes would share the SR&ED expenditure limit.
FES 2024 will also allow corporations to claim capital expenditures again under the SR&ED program.
These enhancements to the SR&ED program will be effective for tax years that begin on or after December 16, 2024.
FES 2024 further announces plans to introduce a patent box regime—a lower tax rate on income derived from patents or intellectual property. More details on administration and updates to qualified expenses will also be announced in Budget 2025.
FES 2024 introduces several changes so that more non-profit organizations (NPOs) will be subject to reporting requirements.
Specifically, FES 2024 proposes that NPOs with total gross revenues over $50,000 will now be required to file an annual information return. Currently, an NPO is only required to file an annual information return if:
In addition, FES 2024 announces that NPOs that don’t meet the thresholds for filing the annual information return, must file a new short-form return containing basic information about the organization.
This measure applies to 2026 and subsequent tax years.
FES 2024 announces the design and implementation details for the EV supply chain investment tax credit. It’s a 10% refundable credit for certain taxable Canadian corporations that acquire property between 2024 and 2032 (with a 5% credit proposed for property acquired in 2033 or 2034). These corporations must meet certain acquisition thresholds for buildings and structures (including component parts) in the three areas being:
In order to be eligible for the credit, a corporation (or group of related corporations) would have to either acquire at least $100 million of eligible property in each of the three above areas, or acquire at least $100 million of eligible property in two of the areas and own a qualifying investment in a corporation which acquires at least $100 million of eligible property in the third area.
This credit was initially proposed in Budget 2024.
FES 2024 provides further details on the clean electricity investment tax credit. This is a 15% refundable credit for certain organizations that acquire eligible investments in certain qualifying equipment.
FES 2024 provides additional conditions that a provincial or territorial government must meet to be considered an eligible jurisdiction so crown corporations can access the tax credit for investments.
FES 2024 also proposes to include the Canada Infrastructure Bank as an eligible entity for this credit. This credit was first announced in Budget 2023 and expanded on in Budget 2024.
FES 2024 expands the eligibility of the clean hydrogen investment tax credit to include methane pyrolysis as an eligible production pathway.
The Clean Hydrogen investment tax credit is a 15%, 25%, or 40% refundable tax credit and is available to businesses for purchases and installation of eligible equipment used in the production of hydrogen. The current production pathways included hydrogen produced from the electrolysis of water or from the reforming or partial oxidation of natural gas or other eligible hydrocarbons. The tax credit was introduced in Fall Economic Statement 2022 and further expanded in Budget 2023.
This expanded eligibility applies to property acquired on or after December 16, 2024.
FES 2024 expands the ability to defer the taxation of capital gains realized on qualifying dispositions of eligible small business corporation (ESBC) shares by updating the definition of an ESBC share. It announces both preferred shares and common shares can qualify as an ESBC share and increases the limit of the total carrying value of the assets of the ESBC and related corporations to $100 million before and after the share was issued. Under the current rules, a share must be a common share issued by an ESBC to the individual and the total carrying value must not exceed $50 million.
FES 2024 also increases the period to acquire replacement shares to include the entire calendar year after the year of disposition. Currently, this deferral is available to individuals if the proceeds from the disposition are used to acquire replacement ESBC shares within the year of disposition, or up to 120 days following the year of disposition.
This measure applies to dispositions that occur on or after January 1, 2025.
FES 2024 announces that individuals who receive the new Canada Disability Benefit won’t have to include those amounts in their income for tax purposes. Starting in July 2025, certain individuals eligible for the disability tax credit will receive up to $2,400 annually under the Canada Disability Benefit program.
This measure aims to ensure that income-tested benefits (e.g., the Canada Child Benefit) aren’t reduced because of payments from the Canada Disability Benefit program.
Currently, this amount is included in income with an offsetting deduction, so although the payment is tax-free, it could impact other income-tested benefits.
This measure applies to 2025 and subsequent tax years.
FES 2024 expands eligibility for the Canada Carbon Rebate rural supplement to provide access to more individuals residing in rural and small communities. Specifically, FES 2024 expands eligibility to include individuals who live in a census rural area (less than 1,000 individuals) or a small population centre (less than 30,000 individuals) within a census metropolitan area (CMA). Currently, the rural supplement is available to individuals that reside outside a CMA.
The Canada Carbon Rebate rural supplement provides qualifying individuals with an additional 20% of the base amount of the Canada Carbon Rebate.
This change applies as of the 2024 tax year, with the first payment occurring in April 2025.
FES 2024 allows residents of the islands of Haida Gwaii to claim up to the maximum value of the Northern Residents Deductions by reclassifying the community to the Northern Zone (from the Intermediate Zone). Currently, residents of Intermediate Zones are eligible for half the amount of deductions. This measure is effective as of the 2025 tax year.
FES 2024 proposes changes to certain excise and duty measures to:
In addition, FES 2024 announces that the federal government will explore a transition to a national duty stamp for cannabis products (from provincial duty stamps). The federal government is expected to announce more details in Budget 2025.
Finance reaffirms its intention to implement certain previously proposed measures, subject to modification resulting from consultations with stakeholders.
Some key proposed measures include:
In response to housing challenges across Canada, FES 2024 introduces the following initiatives to:
To address affordability challenges, FES 2024 announces the following initiatives:
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Disclaimer
The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal, or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.
