The Productivity Mega Deduction: what the proposal means for your business

Published October 1, 2026. This is a federal proposal. We will update this post if the rules change.

On September 15, 2026, the federal government proposed the Productivity Mega Deduction. It would let a business deduct the full cost of most new depreciable assets in the year they are ready to use. Draft legislation came out the same day. It is a proposal, so the details can still change.

How assets are written off today

When you buy equipment, a computer or a truck for your business, you usually cannot deduct the whole cost in the year you buy it. You claim part of it each year as capital cost allowance (CCA). In the first year, the half-year rule usually cuts the claim in half. So a large purchase can take several years to write off.

What the proposal would change

Under the proposal, most assets bought on or after September 15, 2026 could be written off in full in the year they become available for use. The government says it would be permanent. No end date is given.

“Available for use” matters. An asset usually counts as available for use when you first use it to earn income, or when it is delivered and able to do its job. A machine bought in December but not working until January would usually be claimed in the next year.

What is left out

The proposal does not cover:

• buildings in CCA classes 1 and 3, and additions to them
• goodwill, franchises and licences (classes 14 and 14.1)
• class 51 property, such as regulated natural gas pipelines
• certain vehicles in classes 10 and 10.1
• property under Schedules V and VI of the Income Tax Regulations

Assets that are left out would still get the existing Accelerated Investment Incentive, which gives a larger first-year claim than the normal rules. If you are buying a vehicle, talk to us first. The vehicle rules in the draft have their own conditions, and a cost limit on passenger vehicles still applies.

Used assets

A used asset qualifies only if both of these are true:

• neither you nor anyone you do not deal with at arm’s length owned it before
• it did not come to you on a tax-deferred rollover

So buying equipment from a related company, or moving your own equipment into your new corporation, will usually not qualify.

Incorporated or not

A corporation can use the deduction even if it creates a loss. For individuals, and partnerships with members who are individuals, the deduction is limited. It cannot be used to create or increase a loss. If you run your business as a sole proprietor, the deduction can bring that business income down to zero, but not below.

What to do now

• Keep the invoice and the date each asset was delivered and first used.
• Check whether the asset is new to you or came from someone related to you.
• Plan large purchases with your accountant before year-end, not after.
• Watch for changes. The rules are a proposal until Parliament passes them.

For more on year-end timing, see our BC tax deadlines calendar and our guide to whether a car lease is tax deductible. Trucking businesses can read about our trucking and logistics accounting.

FAQ

Source: Department of Finance Canada, Productivity Mega Deduction backgrounder, September 15, 2026.

Planning a large purchase? Talk to us or call 778-779-4212.

General information only. Talk to us about your situation.