2024 Fall Economic Statement: Summary and Highlights

On November 20, 2024, the federal government released the 2024 Fall Economic Statement (FES) against a backdrop of shifting economic challenges. While the statement provided key updates to business and tax measures, it arrived with a sudden twist: Deputy Prime Minister and Finance Minister Chrystia Freeland resigned the day before its release, leaving the FES to speak for itself.

The FES projects a budget deficit of $38.9 billion for the 2024-25 fiscal year, with subsequent deficits of $37.2 billion for 2025-26 and $36.5 billion for 2026-27. This year’s focus lies on fostering innovation, addressing housing challenges, and promoting fiscal stability. 2023-2024 deficit is forecast to be $61.9 billion – higher than the $40 billion projected earlier in the year.

No major tax rate changes

As in previous years, there are no changes to personal, corporate, or GST tax rates. Personal tax brackets will continue to be indexed for inflation. Visit our tax rates page for an updated list of rates for 2024 and beyond.

Personal tax measures

Capital gain rollover for Eligible Small Business Corporation (ESBC) shares

This program is of limited benefit as it wasn’t extensively used. Currently, gains from the disposition of ESBC shares can be deferred if the proceeds of disposition are used to purchase replacement ESBC shares within the year, or 120 days in the following year.

The FES proposes to extend the period to purchase replacement shares to the remainder of the year or the entire following calendar year. Eligible replacement shares now include common and preferred shares and the carrying value of the ESBC and related companies would be increased to $100 million.

Automatic tax filing pilot program

The FES announces the introduction of an automatic tax filing pilot program for individuals with lower incomes. The pilot program will launch for the upcoming tax year and the CRA will proactively assess and prepare tax returns for eligible individuals based on available information.

Disability benefit 

The 2024 FES also introduced an important update to the Canada Disability Benefit. The benefit will be exempt from taxation under the Income Tax Act, ensuring recipients receive the full amount without deductions.

Business tax measures

Scientific Research and Experimental Development (SR&ED) program changes

One of the most significant announcements in this year’s FES involves modernizing the Scientific Research and Experimental Development (SR&ED) tax incentive program. Historically, the SR&ED program allows businesses to deduct qualifying expenditures and claim investment tax credits (ITCs), with rates that vary depending on the size and structure of the business. The proposed changes include:

• Raising the annual expenditure limit: The limit for the enhanced 35% refundable ITC will increase from $3 million to $4.5 million.
• Increasing phase-out thresholds for taxable capital: The taxable capital threshold for determining the expenditure limit will rise from $10 million to $15 million at the lower end and from $50 million to $75 million at the upper end.
• Extending access to public corporations: For the first time, eligible[1] Canadian public corporations will be able to claim the enhanced 35% ITC on up to $4.5 million of qualified expenditures annually. The expenditure limit will phase out on a straight-line basis when the corporation’s average gross revenue over the prior three years is between $15 million and $75 million. Members of a corporate group will be required to share this $4.5 million expenditure limit.
• Capital expenditures restored: The SR&ED eligibility of capital expenditures—removed in 2014—will be restored for both income deductions and ITCs. This applies to property acquired on or after December 16, 2024.

Additionally, Canadian-controlled private corporations (CCPCs) will have a choice: they can phase out their $4.5 million expenditure limit based on either taxable capital (ranging from $15 million to $75 million) or a gross revenue phase-out structure, aligning their eligibility with the new rules for public corporations.

These updates provide more generous support for small and medium-sized businesses (SMEs), small-cap public companies, and innovators, strengthening Canada’s competitiveness in global markets.

Accelerated Investment Incentive (AII) and Immediate Expensing Measures (IEM)

The AII and IEM are pivotal components of Canada’s tax policy, designed to stimulate business investment by allowing accelerated capital cost allowances for qualifying property.

Introduced in 2018, the AII provides enhanced first-year depreciation rates for eligible property, enabling businesses to deduct a larger portion of an asset’s cost in the year it becomes available for use. The AII was set to be phased out between 2024 and 2027; however, the 2024 Fall Economic Statement (FES) proposes to fully reinstate the AII for qualifying property acquired on or after January 1, 2025, and available for use before 2030. A four-year phase-out will commence in 2030, with complete elimination for property available for use after 2033.

The IEM allows certain businesses to immediately deduct the full cost of specific capital assets, promoting rapid investment in productivity-enhancing equipment. It was scheduled to be phased out between 2023 and 2028, but the FES proposes to fully reinstate the IEM for qualifying property acquired on or after January 1, 2025, and available for use before 2030. Similar to the AII, the phase-out will begin in 2030, with complete elimination for property available for use after 2033.

Additional Tax and Compliance Measures

Reporting changes for NPOS

The FES has proposed that NPOs with a total gross revenue of $50,000 or higher be required to file an income tax return. Smaller NPOs who didn’t need to file an NPO information return will now need to file a new short form information return that collects limited information.

Patent box regime

The government has also announced its intent to implement a patent box regime, a measure designed to incentivize the development and retention of intellectual property in Canada by applying a preferential tax rate to qualifying IP income. Further details are expected to be revealed in Budget 2025.

What this means for you

The 2024 Fall Economic Statement introduces key changes for businesses and individuals, particularly around innovation incentives, clean technology tax credits, and housing-related measures.

If your business engages in SR&ED-qualifying activities, clean energy projects, or capital investments, now is the time to take advantage of these updates. Talk to your DMCL advisor for personalized advice and strategic planning in response to these changes.

[1] Eligible Canadian public corporations must be a resident in Canada, have shares listed on a designated stock exchange, and not be controlled directly or indirectly by a non-resident.

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