Most tax changes announce themselves and then apply going forward, which gives everybody time to adjust and means nobody misses anything by inattention. This one does not work that way. The largest expansion of Canada's SR&ED programme in decades applies to taxation years that began on or after December 16, 2024, which for a great many Canadian companies means a year that has already ended, already been calculated, and in some cases already been filed under the old rules.
Key Takeaway
Bill C-15, the Budget 2025 Implementation Act No. 1, received Royal Assent on March 26, 2026, enacting the SR&ED changes announced in the 2024 Fall Economic Statement and expanded in Budget 2025. The annual expenditure limit for the enhanced 35% refundable investment tax credit rose from $3 million to $6 million, taking the maximum annual refundable credit from roughly $1.05 million to $2.1 million. Taxable capital phase-out thresholds increased from $10 million to $50 million, up to $15 million to $75 million. Eligibility for the enhanced refundable credit was extended to eligible Canadian public corporations. Capital expenditure eligibility was restored for both the deduction and the credit, effective for capital property acquired after December 15, 2024, along with current expenditures on leased equipment, machinery and facilities. Critically, the expenditure limit changes apply for taxation years beginning on or after December 16, 2024, which reaches into already-completed and in some cases already-filed years.
Start With The Effective Date
Almost every summary of these changes leads with the doubled limit. The effective date deserves to come first, because it converts an interesting policy development into an immediate action item.
PwC states that the further increase to $6 million is effective for taxation years that begin after December 15, 2024[1]. Welch LLP puts it in the same terms, noting that these changes will apply for tax years starting on or after December 16, 2024[2]. KPMG confirms the same framing, describing the limit as effective for taxation years beginning on or after December 16, 2024 and now finalized at $6 million[3].
Consider what that means operationally. A corporation with a December 31 year end had a taxation year beginning January 1, 2025, which falls squarely within the new rules. That year ended in December 2025, its T2 was likely prepared through 2026, and depending on when it was completed the claim may have been calculated against a $3 million limit, or a $4.5 million limit, or the final $6 million one. Bill C-15 only received Royal Assent on March 26, 2026[2], which is after many such returns were being prepared and some were filed.
Any Canadian company that filed a SR&ED claim for a taxation year beginning on or after December 16, 2024 should confirm which limit was applied. Where the old limit was used and expenditures exceeded it, there is potentially a material amount recoverable through an amended claim, subject to the reporting deadlines that apply to SR&ED, which are strict and are discussed below.
The Headline Change
The core numbers, stated plainly.
The 2025 federal budget proposed to increase the annual SR&ED expenditure limit from $3 million to $6 million, with CCPCs entitled to the enhanced ITC rate of 35% up to this increased limit[4]. As a result, qualifying corporations can receive refundable tax credits up to $2,100,000 annually, generated at the 35% enhanced rate[4], up from the previously proposed $1.575 million and roughly double the prior $1.05 million ceiling[1].
MNP makes a point about this that is worth dwelling on: the adjustments to the $6 million expenditure limit and the related taxable capital thresholds are welcome enhancements because these have not been adjusted for decades, despite years of inflation[4]. That framing is more accurate than the "doubling" language suggests. A $3 million limit set decades ago and never indexed had been quietly shrinking in real terms every year. Part of what looks like generosity is catch-up.
KPMG's characterization is nonetheless justified: this is one of the largest expansions of the refundable SR&ED benefit since the programme's inception, doubling available cash flow for R&D-intensive Canadian businesses[3].
Why The Number Moved Twice
A brief sequence matters for reading older commentary correctly, since a substantial body of advice describes an intermediate figure.
The 2024 Fall Economic Statement, delivered in December 2024, proposed increasing the limit from $3 million to $4.5 million, raising the taxable-capital phase-out thresholds, extending eligibility to certain Canadian public corporations, and restoring capital expenditure eligibility[5]. Draft legislation released August 15, 2025 indicated the government intended to follow through on those enhancements[5].
Budget 2025, tabled November 4, 2025, confirmed those changes and went further, increasing the limit from $4.5 million to $6 million[6][1]. Bill C-15 then enacted the package on March 26, 2026[2].
The practical consequence is that guidance published between December 2024 and November 2025 refers to a $4.5 million limit that was superseded before it ever took practical effect. PwC's own note flags this directly, observing that its earlier publication had not been altered to reflect the increased limit announced in the November 4, 2025 budget[1]. A claimant working from advice prepared in that window is working from a number that is $1.5 million too low.
The Phase-Out Thresholds
The limit matters only if a company qualifies for it, and the qualification range widened substantially.
The government proposed increasing the prior-year taxable capital phase-out range for determining the SR&ED expenditure limit to $15 million to $75 million, up from $10 million to $50 million[4]. Mintz describes the effect as allowing growing businesses to retain access to the enhanced refundable credit for longer, with full eligibility below $15 million of taxable capital and partial eligibility up to $75 million[6].
This is a quieter change than the headline limit but for many scaling companies it is the more consequential one. Under the old thresholds, a company that raised capital or accumulated assets could find its enhanced credit eroding from $10 million of taxable capital and gone entirely by $50 million, at precisely the stage when R&D spending was accelerating. The new range delays that erosion materially, and a company that had modelled its credit as declining on the old thresholds should redo that forecast.
The Election Almost Nobody Is Modelling
Buried in the technical detail is a genuine planning choice, and it receives roughly one sentence in most coverage.
CCPCs will have the option to gradually reduce the $6 million expenditure limit where taxable capital employed in Canada for the previous taxation year is between $15 million and $75 million, or to use the same gross revenue phase-out structure proposed for Canadian public corporations[4]. PwC frames it as a new gross revenue structure available to CCPCs by election instead of the taxable capital structure, allowing each CCPC to choose the approach that provides the most beneficial expenditure limit[1]. Welch confirms that instead of using taxable capital as a metric, CCPCs now have the option to elect the gross revenue method[2].
This is an optimization decision with real money attached, and the two metrics diverge sharply for certain business profiles. A capital-intensive company with modest revenue, which describes many hardware, biotech and cleantech businesses, may be constrained on taxable capital while sitting comfortably below the gross revenue thresholds. A capital-light company with substantial revenue, which describes many software businesses, may face the opposite. The election lets each pick its more favourable measure, but only if someone actually computes both.
Our expectation, and we state it as expectation rather than finding, is that this election will be underused, because it requires a deliberate modelling exercise that a routine claim preparation process will not prompt. Any CCPC near either phase-out range should have both calculations run before filing.
Public Corporations Are In
A structural expansion of who can access refundable credits at all.
The government extended eligibility for the enhanced refundable 35% tax credit to eligible Canadian public corporations, again up to $6 million of qualifying SR&ED expenditures annually[4]. For an eligible Canadian public corporation, the expenditure limit will be reduced on a straight-line basis where average gross revenue over the three preceding years, on a consolidated basis, exceeds $15 million, and is fully eliminated at $75 million[1][2].
Refundability is the substance here. A non-refundable credit is worthless to a company with no tax payable, which describes many pre-profit public companies on the TSX Venture Exchange and similar listings. Extending the refundable enhanced credit to eligible public corporations converts a deferred benefit into cash for exactly the cohort that needs cash.
Mintz raises a practical consideration that public companies should weigh: they may need to evaluate whether the enhanced refundable credit is valuable enough to justify adopting procedural safeguards to monitor non-resident ownership and implement shareholder residency tracking systems or other mechanisms to maintain eligibility[6]. For a widely-held public company, knowing and monitoring the residency composition of its shareholder base is a non-trivial ongoing obligation, and the cost of that infrastructure should be weighed against the credit available.
Capital Expenditures Come Back
The reversal of a restriction that had been in place for years, and the change with the longest-term consequence.
Budget 2025 restores the eligibility of capital expenditures related to equipment, machinery or facilities used directly in research and development, for both components of the SR&ED programme: the deduction against income and the tax credit[6]. The restoration is effective for capital property acquired after December 15, 2024[1]. Leyton notes this reverses a long-standing restriction, Canada having eliminated capital expenditure eligibility from the programme years ago[7], and RDP describes it as restoring an important incentive for companies investing in equipment and other capital assets tied directly to R&D, increasing the attractiveness of long-term investments in innovation infrastructure[8].
The dual application matters and is easy to miss. This is not only a credit change; capital expenditures again generate both a deduction against income and a tax credit. For a company evaluating whether to acquire dedicated R&D equipment, the after-tax cost has changed materially, and any capital budgeting analysis prepared before December 2024 that concluded against a purchase should be revisited on the new arithmetic rather than assumed still valid.
Note the date precision: the expenditure limit changes key to taxation years beginning on or after December 16, 2024, while capital expenditure eligibility keys to property acquired after December 15, 2024. These are consistent but they are different tests, one about the corporation's year and one about the asset's acquisition date, and a company should apply each correctly rather than assuming a single cutoff.
The Lease Provision
An element that receives almost no attention and expands the practical reach of the capital restoration considerably.
Current expenditures relating to the lease of equipment, machinery or facilities used directly in research and development now also qualify[6].
This matters because many R&D-intensive businesses lease rather than buy, either because the equipment obsolesces quickly, because capital is scarce, or because the facility requirement is temporary. Under a regime that recognized only purchased capital, those businesses received nothing from the restoration. Including leased equipment and facilities means the benefit reaches companies whose R&D infrastructure is rented, which in practice includes a large share of early-stage Canadian science and hardware businesses operating out of leased lab or shop space.
A company that has been treating lease costs for R&D-dedicated equipment or facilities as ordinary operating expense outside its SR&ED claim should revisit that treatment.
The Associated Corporation Trap
A constraint that limits the benefit for group structures and is easy to overlook when the headline number doubles.
The enhanced refundable credit expenditure limit is shared between associated corporations, meaning businesses with multiple corporate entities under shared ownership and control will share the limit[6]. Knowledge Gap makes the same point, noting the expanded limit supports corporations that share the expenditure limit across their associated group[9].
The $6 million is therefore a group ceiling rather than a per-entity entitlement. A founder operating through several corporations, a common structure where a holding company sits above one or more operating entities, does not multiply the limit by incorporating more. What the increase does deliver to such groups is more room before the shared ceiling binds, which is genuine but different from what a per-entity reading would suggest.
Where a group's aggregate qualifying expenditures now approach $6 million, the allocation of the limit among associated corporations becomes a decision worth making deliberately rather than by default, particularly where entities have different tax positions or different refundability outcomes.
The Wider Package
SR&ED sits inside a broader set of capital incentives, and a company assessing its position should look at the package rather than the credit alone.
The government has grouped several capital-focused tax incentives under the name "Productivity Super-Deduction," covering investment types designed to improve productivity, including reinstatement of the Accelerated Investment Incentive providing an enhanced first-year write-off for most capital assets, and immediate expensing at 100% first-year write-off for manufacturing or processing machinery and equipment[10]. The same commentary describes SR&ED as existing within a larger strategy to incentivize capital investment and boost Canada's global competitiveness[10].
For a Canadian manufacturer contemplating equipment, several of these can apply to the same broad decision through different mechanisms, and the interaction should be modelled by a tax professional rather than assumed additive. Note that this source is published by a consultancy that assists with government funding applications, so its framing is promotional; the underlying measures are nonetheless real budget items.
The Productivity Connection
It is worth connecting this to the diagnosis examined elsewhere in this publication, because the policy design responds directly to it.
The Bank of Canada's productivity analysis identified weak business investment in machinery, equipment and intellectual property as a primary driver of Canada's flat productivity, and C.D. Howe subsequently reported machinery and equipment investment falling further. Budget commentary makes the same link explicitly, noting that investments in R&D are known to improve firm performance, that firms undertaking R&D to innovate consistently achieve higher productivity growth, and that these benefits are amplified for firms making complementary investments[5].
Whether restored capital eligibility and a doubled expenditure limit shift aggregate Canadian business investment is a question only future data answers, and this publication's review of that data does not support easy optimism about the default response. But the measures are aimed precisely at the mechanism the diagnosis identified, which is more than can be said for many policy responses to the productivity file, and for an individual firm the after-tax economics of R&D capital investment have genuinely improved.
A Worked Case: The Amendment Nobody Filed
A Canadian software and hardware company with a December 31 year end, roughly $5.2 million in qualifying SR&ED expenditures for its 2025 taxation year, and taxable capital of about $12 million. The reconstruction below illustrates the pattern rather than reporting a specific engagement.
Its 2025 T2 and SR&ED claim were prepared in early 2026 by an adviser working from the position as then understood, applying the $3 million enhanced limit. The claim generated roughly $1.05 million of enhanced refundable credit on the first $3 million, with the balance at the lower non-refundable rate.
Under the enacted rules, the corporation's taxation year began January 1, 2025, after the December 16, 2024 threshold, and its taxable capital of $12 million sits below the new $15 million full-eligibility level. The applicable enhanced limit was $6 million, not $3 million. On $5.2 million of qualifying expenditures the enhanced refundable credit is materially larger, and the difference is cash rather than a deferred attribute.
Separately, the company had leased dedicated test equipment during 2025 and treated the lease cost as ordinary operating expense outside the claim, and had deferred purchasing a piece of fabrication equipment in early 2025 on an analysis that no longer reflects the restored capital eligibility for property acquired after December 15, 2024.
None of this required anyone to do anything wrong. The rules changed twice and were enacted after the work was done. What it requires now is someone going back to look, within the applicable SR&ED reporting deadline, which is the point of this article.
What To Do, In Order
Identify every taxation year beginning on or after December 16, 2024. For most Canadian corporations this captures at least one completed year and possibly two.
Establish which expenditure limit was actually applied. $3 million, $4.5 million or $6 million. Given the timing of Royal Assent in March 2026, claims prepared earlier may reflect a superseded figure.
Check the SR&ED reporting deadline before anything else. SR&ED has strict filing deadlines and a claim not filed within them is generally lost regardless of merit. Whether an amendment is still available is the first question, not the last, and it should be answered immediately rather than after the analysis.
Model both phase-out structures if you are a CCPC near either range. Taxable capital versus gross revenue is an election, and the more favourable answer differs by business model. This will not happen automatically.
Revisit capital expenditure decisions made since December 2024. Both purchases declined on old arithmetic and lease costs excluded from claims.
If you are a public corporation, assess eligibility and its cost. The enhanced refundable credit is now available, but maintaining eligibility may require shareholder residency monitoring infrastructure whose cost should be weighed against the benefit.
Confirm your associated group allocation. The $6 million is shared, and where the group is approaching it the allocation should be deliberate.
What Has Not Changed
An expansion of the credit is not a relaxation of what qualifies, and it would be a serious error to read it that way.
Nothing in these measures alters the substantive test for what constitutes scientific research and experimental development, the requirement for systematic investigation, the technological uncertainty and advancement criteria, or the contemporaneous documentation expectations that determine whether a claim survives review. A larger limit applied to expenditures that do not qualify produces a larger disallowance, not a larger refund.
Given that a doubled limit will increase both claim volumes and claim sizes, it is reasonable to expect review activity to follow the money, which makes the documentation discipline examined elsewhere in this publication more important rather than less. The companies that benefit most from this expansion will be those whose technical narratives and contemporaneous records were already solid enough to support a claim at twice the previous scale.
The Limits Of This Analysis
Several caveats matter. This article describes measures announced in the 2024 Fall Economic Statement and Budget 2025 and enacted through Bill C-15 with Royal Assent on March 26, 2026; several cited sources were written while these were proposals and use prospective language, and readers should confirm the enacted text rather than rely on budget-stage commentary including this summary. Sources describe effective dates variously as "taxation years that begin after December 15, 2024" and "on or after December 16, 2024," which we read as equivalent, and separately key capital eligibility to property acquired after December 15, 2024; a claimant should confirm the precise statutory tests. This article does not address SR&ED filing deadlines, which are strict and determinative for any amendment, nor the substantive eligibility criteria, nor provincial credits which vary and interact. Several sources cited are published by firms that prepare SR&ED claims commercially. This is not tax advice; engage a qualified Canadian tax professional before amending or filing.
Frequently Asked Questions
What is the new SR&ED expenditure limit?
Does this apply to years I have already filed?
Are capital expenditures eligible again?
What is the election CCPCs can make?
Can public companies claim the enhanced credit now?
Does the $6 million apply per corporation in a group?
References
- PwC Canada. (2025, November 10). Tax Insights: SR&ED Updates ─ Enhanced Credits, Expanded Eligibility And Emerging Opportunities, on the $6 million limit, effective dates, the CCPC gross revenue election and restored capital eligibility. pwc.com/ca/en/services/tax/publications/tax-insights/sred-changes-2025.html
- Welch LLP. (2026, April 9). 2026 Changes In SR&ED: Largest Expansion In Decades, on Bill C-15 Royal Assent March 26, 2026, the ECPC gross revenue calculation and the CCPC election. welchllp.com/insights/knowledge/2026-changes-in-sred-largest-expansion-in-decades
- KPMG Canada. (2026, February). Canada's SR&ED Program Enters A New Era. kpmg.com/ca/en/insights/2026/02/canadas-sr-and-ed-program-enters-a-new-era.html
- MNP. (2026, February 6). Significant Enhancement Announced To The SR&ED Program, on the expenditure limit, phase-out ranges, the inflation point and public corporation eligibility. mnp.ca/en/insights/directory/significant-enhancement-announced-sr-ed-program
- SR&ED Education and Resources. (2026, March 13). 2025 Federal Budget Unveils Historic SR&ED Reform, on the Fall Economic Statement proposals, the August 15, 2025 draft legislation and the productivity rationale. sreducation.ca/sred-in-the-2025-federal-budget
- Mintz. (2025, November 13). Innovate, Baby, Innovate? Key Enhancements To Canada's SR&ED Program In Budget 2025, on the associated corporation sharing rule, phase-out thresholds, public corporation monitoring, capital restoration and the lease provision. mintz.com/insights-center/viewpoints/2906
- Leyton Canada. (2025, November 14). Federal Budget 2025 SR&ED Program Expansion. Note: published by a firm that prepares SR&ED claims. leyton.com/ca/en/insights/articles/federal-budget-2025-sred-program-expansion
- RDP Associates. (2026, January 19). What The 2025 Canadian Federal Budget Means For SR&ED. Note: published by a SR&ED consultancy. rdpassociates.com/sred/what-the-2025-canadian-federal-budget-means-for-sred
- Knowledge Gap. (2026, April 3). Budget 2025: Updates To The SR&ED Program. knowledgegap.ca/post/sred-program-2025
- NorthBridge Consultants. (2025, November 7). Budget 2025: SR&ED Gets A Major Upgrade & Key Business Tax Changes, on the Productivity Super-Deduction grouping. Note: published by a government funding consultancy. northbridgeconsultants.com/2025/11/07/budget-2025-sred-gets-a-major-upgrade
This article discusses federal budget measures and enacting legislation and is provided for general informational purposes. It is not tax advice. SR&ED filing deadlines are strict and determinative; substantive eligibility criteria are unchanged and are not addressed here. Engage a qualified Canadian tax professional before amending or filing a claim.