On December 16, 2024, federal government House Leader, Karina Gould, presented the Fall Economic Statement, outlining $23.3 billion in new spending over the next six years.
No changes to personal or corporate income tax rates were proposed. The statement reaffirmed the government's intention to proceed with previously announced measures, including legislative proposals related to increase the capital gains inclusion rate, outlined in the Notice of Ways and Means Motion presented on September 23, 2024.
Below is a summary of key tax measures included in the 2024 Fall Economic Statement:
Tax Exemption for the Canada Disability Benefit
The Canada Disability Benefit, a new initiative starting in July 2025, aims to provide up to $2,400 annually to low-income, working-age Canadians eligible for the Disability Tax Credit. The 2024 Fall Economic Statement proposes to exempt this benefit from taxes to prevent it from reducing other federal disability benefits, especially for lower-income individuals with disabilities. This exemption will apply starting in the 2025 taxation year.
Capital Gains Rollover on Reinvestment in a New Active Business
Individuals can defer taxes on capital gains from the sale of Eligible Small Business Corporation (ESBC) shares if the proceeds are used to acquire replacement ESBC shares within the year of the sale, or up to 120 days after. The 2024 Fall Economic Statement proposes extending this period to include the entire calendar year after the sale and expanding the definition of an ESBC share to include both common and preferred shares. The asset limit for the ESBC and related corporations would also increase from $50 million to $100 million. These changes would apply to qualifying dispositions on or after January 1, 2025.
Extension of Accelerated Investment Incentive and Immediate Expensing Measures
The statement proposes extending the Accelerated Investment Incentive and immediate expensing for specific equipment, including manufacturing machinery, clean energy generation, and zero-emission vehicles, for property acquired on or after January 1, 2025, and put into use before 2030. A four-year phase-out of these measures would follow from 2030 to 2033. These temporary accelerated depreciation measures are an effective way of promoting business investment. The government believes these measures will support Canada's competitiveness while it continues to monitor U.S. tax reform developments.
Boosting the Scientific Research and Experimental Development (SR&ED) Tax Credit
The SR&ED tax credit, which supports R&D activities in Canada, will see several enhancements starting December 16, 2024. These include:
- Increasing the annual expenditure limit for Canadian-controlled private corporations to qualify for the enhanced 35% investment tax credit, from $3 million to $4.5 million.
- Raising the taxable capital phase-out thresholds for the enhanced credit from $10 million and $50 million to $15 million and $75 million, respectively.
- Extending the enhanced refundable SR&ED credit to Canadian public corporations.
- Restoring eligibility for capital expenditures for both the income deduction and the investment tax credit components of the SR&ED program, effective for property acquired on or after December 16, 2024.
Further details on the program’s administration and updates to qualified expenses will be provided in the 2025 Federal Budget.