The Productivity Mega Deduction: Canada's Proposed 100% Write-Off for Business Assets

On September 15, 2026, Prime Minister Carney announced the Productivity Mega Deduction at the Canada Investment Summit, and the Department of Finance released draft legislation the same day. If it becomes law as proposed, most businesses will be able to write off the full cost of new equipment and other depreciable assets in the first year, on a permanent basis.

Here's what's in it, what's excluded, and how Ontario small business owners should think about it before year-end.

The short version

What it is: immediate expensing, meaning a 100% capital cost allowance (CCA) deduction in the year an asset becomes available for use.
What qualifies: most depreciable property acquired on or after September 15, 2026, according to the Department of Finance backgrounder.
What's excluded: buildings and additions to buildings (CCA classes 1 and 3), goodwill, franchises and licences (classes 14 and 14.1), class 51 property, certain vehicles in classes 10 and 10.1, and property depreciated under Schedules V and VI of the Income Tax Regulations.
How long: it's proposed as a permanent measure with no end date.
Status: proposed, not yet law.

How immediate expensing works

Normally you can't deduct the full cost of a capital asset in the year you buy it. You claim CCA over several years at the rate set for the asset's class. Immediate expensing lets you deduct the whole cost in the year the asset becomes available for use. That lowers your taxable income right away and frees up cash when you're investing.

Example: an Ontario corporation buys $60,000 of new production equipment in November 2026 and puts it to work in December. Under the proposal, it could deduct the full $60,000 on its 2026 return instead of spreading the deduction over several years.

How it builds on Budget 2025

Budget 2025 introduced the Productivity Super-Deduction, which provides immediate expensing for about 15% of business investment in capital assets. The Department of Finance describes it as covering items like machinery, equipment and buildings used for manufacturing and processing, clean energy and energy conservation equipment, zero-emission vehicles, patents, data network infrastructure, and computers.

The Mega Deduction widens that to roughly two-thirds of investment in capital assets, according to Finance. Two related points:

Manufacturing and processing buildings aren't covered by the Mega Deduction (class 1 is excluded), but they stay on the separate temporary immediate expensing track announced in Budget 2025.
Assets that don't qualify continue to get the enhanced first-year deduction under the Accelerated Investment Incentive.

Rules to watch

Used assets: under the proposed rules, a previously used asset only qualifies if neither you nor a non-arm's length person owned it before, and it wasn't transferred to you on a tax-deferred rollover.
Sole proprietors and partnerships: for individuals, and for partnerships with individual partners, special rules restrict using the deduction to create or increase a loss. They're modelled on the temporary immediate expensing rules introduced in 2021.
Available for use: buying an asset isn't enough. It has to be available for use before the end of your tax year for you to claim it that year.
Vehicles: certain vehicles in classes 10 and 10.1, which include many passenger vehicles, are excluded. Check your vehicle's class before assuming it qualifies.

What small business owners should do now

Plan, but don't bet on a draft. Proposals can change before they become law. If you were going to buy the equipment anyway, the timing may work in your favour. Buying assets just to get a deduction rarely makes sense.
Keep the right records. Save invoices and note the delivery date and the date each asset went into use.
Think about your year-end. Assets acquired on or after September 15, 2026 and available for use by your year-end are the ones in play for your 2026 return.
Don't forget HST. Input tax credits for HST paid on business assets are claimed separately on your HST return.

Sources

Planning a big purchase before year-end? Book a consultation and we'll map out the tax impact first.