The federal government’s 2024 Fall Economic Statement was delivered this week amid the chaos of Finance Minister Chrystia Freeland’s resignation, her replacement in that portfolio by Public Safety Minister Dominic LeBlanc, and ongoing threats of a trade war from South of the Border.
Within that context, Ottawa announced a higher-than-expected deficit of $61.9 billion for the 2023-24 fiscal year, significantly exceeding the government’s promises that the annual shortfall for this year would not top $40.1 billion. The budgetary overshoot was attributed largely to costs related to Indigenous legal claims and liabilities. While future deficits are expected to gradually decline—to $48.3 billion in 2024-25, $42.2 billion in 2025-26, and $31 billion by 2026-27—these deficits remain high by historical (non-pandemic) standards.
Nevertheless, the government’s projections show the annual shortfall dipping below 1 per cent of GDP by 2026-27, with the federal debt-to-GDP ratio expected to decline annually until 2029-30.
For business owners, the 2024 Fall Economic Statement delivered several significant policy proposals that could have an impact on everything from productivity to profitability (visit the government website for a full overview.
The pressing question is whether the eventual legislation implementing these measures will be enacted, given the Trudeau government’s precarious minority standing and the risk of the government falling in the New Year. How the political winds will blow in Ottawa in the coming months is anyone’s guess. In the meantime, the entrepreneurial community can prepare for the potential passage of these business-focused measures:
Temporary HST Holiday
A temporary HST holiday on qualifying goods is now in effect and will run until February 15, 2025. This measure is projected to cost $1.6 billion and is intended to provide immediate relief to consumers to stimulate spending. Business owners in retail and consumer goods sectors may benefit from increased customer demand during this period, but the implementation and operational costs related to the measure are expected to be significant.
Accelerated Investment Incentive
The government has proposed a reinstatement of the Accelerated Investment Incentive, which includes an enhanced first-year capital cost allowance on most categories of depreciable capital property, along with immediate expensing across specific categories:
- Manufacturing or processing machinery and equipment
- Clean energy generation and energy conservation equipment
- Zero-emission vehicles
As outlined in the Fall Economic Statement, “These incentives would apply to qualifying property acquired on or after January 1, 2025, and available for use before 2030.” A phased reduction would occur between 2030 and 2033. The initiative, estimated to cost $17.4 billion between 2024-25 and 2029-30, aims to encourage businesses to modernize and invest in new and sustainable technologies.
Enhancements to the SR&ED program
Several proposed changes to the Scientific Research and Experimental Development (SR&ED) program were announced:
- The annual expenditure limit for Canadian-controlled private corporations (CCPCs) to earn an enhanced 35 investment tax credit would increase from $3 million to $4.5 million
- Prior-year taxable capital phase-out thresholds for the enhanced credit would rise from $10 million and $50 million to $15 million and $75 million, respectively
- Enhanced refundable SR&ED credits would now extend to Canadian public corporations
- Capital expenditures for deductions of income and investment tax credit components of the SR&ED program would be allowed, effective immediately, for property acquired after the Fall Economic Statement’s release
These enhancements are designed to support innovation and research efforts among businesses of varying sizes.
Venture Capital and Mid-Cap Growth Funding
The government would allocate $1 billion in 2025-26 for the fourth round of the Venture Capital Catalyst Initiative. An additional $1 billion would target mid-cap growth companies, providing funding for scaling businesses and attempting to foster entrepreneurial activity.
Small Business Tax Adjustments
Changes to the Income Tax Act would broaden the scope of eligible small business corporation shares and relax conditions for related tax rules. These include:
- Allowing preferred shares to qualify for the rollover
- Increasing the asset limit for “eligible small business corporations that qualify for investment” to $100 million
- Extending the “… period to acquire new investments to within the year of disposition and one full calendar year following the year of disposition”
The adjustments take effect for qualifying dispositions on or after January 1, 2025, offering greater tax planning flexibility for small business owners.
Canada Carbon Rebate for Small Businesses
The Canada Carbon Rebate would be modified for the 2024-25 and subsequent fuel charge years:
- Small businesses with 1 to 20 employees would qualify for a payment equivalent to having 20 employees
- Businesses with more than 300 employees would see payments gradually reduced as employee numbers approached 500
- Cooperatives and credit unions would now be eligible for the rebate
Black Entrepreneurship Program
The government has committed $189 million over five years to the Black Entrepreneurship Program, managed by Innovation, Science, and Economic Development Canada. This initiative aims to provide support and resources to Black-owned businesses.
CRA Audits and Tax Enforcement
The Canada Revenue Agency would receive $451.5 million over five years, starting in 2025-26, for audits and tax enforcement. Business owners should always ensure compliance with tax regulations to avoid penalties and interest, but the need for tax filing diligence will be even more important as the CRA gains additional resources to spend on enforcement initiatives.
Support for Innovation and Digital Adoption
- $150 million over three years, starting in 2024-25, would support Global Innovation Clusters
- $24 million over two years, starting in 2025-26, would fund National AI Institutes to advance AI commercialization
- Up to $500 million over four years, starting in 2025-26, would be allocated to the Business Development Bank of Canada to help small- to medium-sized businesses transition to, and implement, new digital technologies
Expansion of Canada Carbon Rebate’s Rural Top-Up
The 20 per cent rural top-up for the Canada Carbon Rebate would be expanded to Canadians living in census rural areas and smaller centres within census metropolitan areas. The change would take effect in April, 2025. This program expansion would benefit an estimated 1.6 million additional Canadians, according to government estimates.
Tony Sokic, Managing Partner
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