The 2024 Fall Economic Statement (The Statement) was delivered by Government House Leader Karina Gould on December 16, 2024, following Finance Minister Chrystia Freeland’s resignation earlier that day. Despite this backdrop of political turmoil, the Statement introduced some measures and updates relevant to business owners.
The Statement outlined a deficit of $61.9 billion for the 2023-24 fiscal year which was over $20 billion more than the targeted deficit of $40 billion. A deficit of $48.3 billion is projected for 2024-25, higher than last year’s projections of $38.4 billion, with a forecast for it to decrease to $23 billion by 2029-30. Notably, there were no changes to personal or corporate income tax rates. In addition to several green economy initiatives for clean electricity, clean hydrogen investment tax credits, and the electric vehicle supply chain, several business measures were announced or updated.
There were also some notable items that the Statement did not include. Firstly, no update was provided regarding the status of implementing the change of the capital gains inclusion rate for dispositions that occurred on or after June 25, 2024. In addition, the Statement did address the $250 rebate cheque publicly proposed by Prime Minister Justin Trudeau for Canadian employees earning less than $150,000 during 2023.
Extending the Accelerated Investment Incentive and Immediate Expensing
The Statement proposes to fully reinstate the Accelerated Investment Incentive (AII), which was originally to be phased out at the end of 2027. The AII will still apply to all capital property subject to the capital cost allowance (CCA) rules, except those properties that are eligible for immediate expensing. Thus, capital additions will recognize 1.5 times the standard CCA deduction where the AII applies.
Immediate expensing for qualifying property, such as manufacturing and processing machinery, clean energy equipment, and zero-emission vehicles, has also been reinstated. Both of these measures will apply to property acquired on or after January 1, 2025, and available for use before 2030. A four-year phase-out period for these measures will follow between 2030 and 2033.
Canada Carbon Rebate for Small Businesses
Announced modifications to the program for the 2024-25 period include introducing a new base minimum payment for businesses with up to 20 employees. For businesses with over 300 employees, rebate amounts will gradually decrease as employee numbers reach 500. The rebate has also been expanded to include cooperative corporations and credit unions.
SR&ED Program Enhancements
Significant proposals have been made to the Scientific Research and Experimental Development (SR&ED) tax credit program. First, the annual expenditure limit has been increased from $3 million to $4.5 million. As such, Canadian Controlled Private Corporations (CCPCs) and certain eligible Canadian public corporations could receive a refundable investment tax credit of up to $1.575 million annually regarding eligible SR&ED expenditures. Additionally, taxable capital phase-out thresholds for enhanced credits have been increased, and capital expenditures would be eligible for both tax deductions and investment tax credits. These measures are effective for taxation years that begin on or after the Fall Economic Statement and are part of broader reforms planned for Budget 2025.
Capital Gains Rollover on Business Investments
The Statement proposes relaxed conditions for capital gains rollovers on eligible small business shares. Preferred shares will now qualify for the rollover, and the asset limit for qualifying small businesses has been increased from $50 million to $100 million. Additionally, the reinvestment period has been extended, allowing reinvestments to occur within the year of disposition and one full calendar year following that year. These changes are applicable to qualifying dispositions on or after January 1, 2025.
Accelerating Digital Adoption for Small Businesses
The government will provide $500 million over four years, starting in 2025-26, to the Business Development Bank of Canada to help small- and medium-sized businesses adopt digital technologies, with a priority on artificial intelligence (AI).
Bateman MacKay is Here to Help
These are highlights from the 2024 Fall Economic Statement. For the full statement, visit Canada.ca. If you have questions about these updates or any other tax issues, contact a Bateman MacKay Business Advisor. Subscribe to our blog and follow us on LinkedIn for additional updates on tax, accounting and business advisory matters, including the 2025 Federal Budget.
