The federal government recently announced major updates to the Scientific Research & Experimental Development (SR&ED) tax incentive program as part of the 2024 Fall Economic Statement (FES). These changes, effective for taxation years beginning on or after December 16, 2024, are designed to increase support for Canadian businesses investing in innovation and R&D.
These changes represent a significant opportunity for businesses currently claiming SR&ED and for those that previously didn’t qualify but now do. Whether you’re a small, growing company or a larger enterprise, these updates open the door to more substantial claims and increased support for innovation.
One of the most significant changes is the reinstatement of capital expenditures as SR&ED-eligible costs. This means businesses can now claim the cost of equipment, tools, and property used directly in SR&ED-eligible R&D activities.
Previously excluded since 2012, this change allows businesses developing hardware, machinery, software-intensive prototypes, or conducting R&D using specialized equipment or high-performance computers to include these costs in their SR&ED claims. For businesses working in gaming, engineering, medical fields, or hardware development, capital expenditures such as testing equipment, high-performance computers, or prototyping tools could significantly increase their SR&ED claims.
Canadian-controlled private corporations (CCPCs) will see an increase in the expenditure limit eligible for the 35% refundable SR&ED tax credit. The annual limit was raised from $3 million to $6 million by Bill C-15, effective for taxation years beginning on or after December 16, 2024.
For growing companies investing heavily in R&D, this is a major opportunity to claim more refundable credits and offset higher research costs.
The government is raising the phase-out thresholds for the 35% refundable ITC:
Additionally, businesses can now choose to base their phase-out calculation on gross revenue instead of taxable capital. This flexibility benefits companies with strong financial performance but heavy R&D spending.
If your business was previously phased out of the refundable SR&ED credits due to taxable capital, this change could bring you back into eligibility. This is especially relevant for growing tech and manufacturing companies nearing these thresholds.
For the first time, eligible Canadian public corporations can access 35% refundable SR&ED tax credits on R&D expenditures up to the new $4.5M limit.
Public companies and their Canadian subsidiaries can now claim refundable SR&ED credits—something previously unavailable. This could encourage more innovation investments among publicly listed firms.
These enhancements are a clear signal that the government is doubling down on supporting innovation in Canada. Whether you’re a CCPC, a publicly traded company, or somewhere in between, the SR&ED program just became more valuable:
At SRED.ca Technical, we’re here to help you make the most of these changes. Our year-round documentation system, including quarterly Traffic Light Reports, ensures you’re ready to capitalize on every eligible opportunity—and stay audit-ready while you’re at it.
If you’re wondering how these changes apply to your business, let’s connect. Whether you’re prototyping hardware, scaling your R&D, or navigating your first SR&ED claim as a public company, SRED.ca Technical has you covered.
Reach out to our team, and we’ll ensure your SR&ED claims are maximized, seamless, and stress-free.
SR&ED just got better. Let’s make the most of it.
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