Federal Budget 2026: What it means for Canadian businesses

Most recently, Canada imposed counter-tariffs covering $27.6 billion in imports from the US, with a focus on sectors that are most impacted by US tariffs. Effective in September 2026, these include sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

The government also announced a $7.5 billion package of new support measures for Canadian workers and businesses most affected by the new US tariffs. We will need to wait to see whether the upcoming budget will introduce any additional measures.

Canadian business leaders have seen a lot of change in the months leading up to the 2026 federal budget. On September 15, 2026, the government announced the introduction of a new Productivity Mega Deduction for capital investments.

This incentive was announced in connection with the Canada Investment Summit. The new deduction is intended to reduce the after-tax cost of projects, accelerate productivity-enhancing capital spending and support investment across Canada.

As part of this announcement, the government is also introducing changes to the previously proposed accelerated capital cost allowance (CCA) rules for low-carbon liquefied natural gas facilities.

Although not specifically linked to the Productivity Mega Deduction, the Canada Revenue Agency announced on September 14, 2026 that, effective immediately, it will be prioritizing advance income tax ruling requests related to investments of $1 billion or more in Canada.

Businesses will want to understand these recent changes in a broader context as we wait to see what this year’s budget has in store.

Source:
EY Tax Alert 2026 no 47 - Finance Canada announces new productivity mega deduction for capital investments | EY - Canada

The Productivity Mega Deduction builds on existing and previously announced CCA measures and resource deductions by extending immediate expensing to a broader range of capital assets and making the immediate deduction available on a permanent basis, effective for property acquired after September 14, 2026.

This new incentive could support innovation, productivity and technology adoption by providing immediate expensing to about two-thirds of capital asset investments, up from approximately 15% covered by the existing Productivity Super Deduction. This includes priorities like fibreoptic cable, mining property, oil and gas pipelines, software and computer equipment, patents, rail track, bridges and roads — all potential growth and innovation drivers.

Source:
Tax Alert 2026 No. 47

The next federal budget is just around the corner. Across Canada, CEOs have become more comfortable operating in an environment defined by continuous change. EY research shows that adaptability is reinforcing confidence, giving leaders the boost needed to move ahead even as uncertainty persists.

For example, M&A appetite was strong in the first half of the year, as CEOs looked for transactions capable of driving disciplined, long-term growth. They’re also doubling down on AI and other tech investments, determined to make progress regardless of ongoing disruption.

Essentially, as CEOs embrace this complicated working world, challenges are becoming chances for progress.

Linking strategy, transactions and transformation with an ecosystem approach can help businesses make the most of today’s reality.

Source:
Canada CEO Outlook 2026 | EY - Canada