Canadian Fall Economic Update: Impact on Business Incentives

Canada’s recently-released Fall Economic Update offers many provisions that directly support business competitiveness and make it easier to invest. Most beneficial to manufacturers is the announcement that the full cost of machinery and equipment can be written off immediately. Businesses outside of the manufacturing industry will also benefit from a similar incentive that supports writing off a greater portion of capital investments in year one.

Canadian government funding announcements were also made through the Fall Economic Update; this includes a significant increase in support for the Strategic Innovation Fund (SIF). The program will receive an additional $800 million over the next five years, including $100 million in direct support for the forestry sector. Further investments in Canada’s Export Diversification Strategy will see additional funding flow to the CanExport program, and programs offered through the Trade Commissioner Service.

The 2018 Fall Economic Update speaks directly to businesses and provides greater support for manufacturers, small businesses, and exporters of all sizes.

Businesses should take note of these announcements and be prepared to take advantage of them in 2019. Will your company make strategic investments into machinery and productivity-boosting equipment? If so, there are incentives that can reduce project expenses and improve return on investment.

What Does the Fall Economic Update Mean for Canadian Businesses?

The 2018 Fall Economic Update takes steps to make Canada’s business tax system more competitive, improve the regulatory environment, and reduce barriers to business growth. It does this in several key ways:

Manufacturing Equipment Investments

Providing sustainable benefits to innovation and productivity, Canadian tax laws will adapt to a similar system as what’s recently been introduced in the United States. As a direct result of this change in regulations, manufacturers will be able to immediately write off the full cost of machinery and equipment used for manufacturing/processing goods. This promotes more investment in cutting-edge technologies and will help more businesses become cost-competitive with other markets.

Clean Energy Investments

Similarly, businesses in any industry can qualify for the full write off of technology investments if those investments have a direct impact on reducing greenhouse gas (GHG) emissions. Investing in clean technologies often has a positive effect on productivity and competitiveness, so this is a great opportunity for smaller businesses or those outside of the manufacturing sector to take advantage of.

Reduce Trade Barriers

Canadian businesses will also have greater access to markets, both domestically and internationally. To increase inter-provincial trade, the federal government will work directly with each province to integrate and improve the Canadian Free Trade Agreement (CFTA). This includes removing regulatory and other barriers, such as transporting goods between provinces and territories, harmonizing food regulations and inspection rules, aligning regulations in the construction sector, and facilitating greater trade in alcohol between provinces and territories. Additional provisions for international trade include developing an Export Diversification Strategy and developing export readiness/mentorship programs.

How the 2018 Fall Economic Update Changes the Government Funding Landscape

The Fall Economic Update also addresses specific government funding programs for businesses and non-profit organizations. Canada’s federal government provided funding for new and well-established funding programs with the aim to support other initiatives, listed above. These funding programs receiving additional funding include:

Strategic Innovation Fund (SIF)

The Strategic Innovation Fund is a federal innovation grant that supports businesses investing in advanced technologies. Firms that develop or invest in leading innovations are eligible to receive up to 20-50% of eligible project costs. This funding is positioned towards large companies that can support significant job growth and reduce greenhouse gas emissions.

As recently announced in the Fall Economic Update, the Strategic Innovation Fund will receive an additional $800 million in funding, including an additional $100 million specifically for the forestry sector. This will help more SIF applicants access funding and drive global competitiveness.

CanExport

CanExport provides federal government grants to help businesses expand their sales outside of Canada. By exploring new markets or growing current export markets, firms can receive up to 50% of eligible project costs to a maximum $50,000 per application. Eligible costs include exhibiting at trade shows, translating/adapting marketing materials, conducting market research, and other export marketing-related expenses.

Canada’s Fall Economic Update provides an additional $100 million in funding to expand the success of CanExport.

As a result of new funding offered through the Fall Economic Update, CanExport has widened its eligibility criteria to support smaller and larger businesses that were previously ineligible for grants. Whereas companies were required to have between 1-250 full-time equivalent (FTE) employees and $200k-$50M in annual revenues, applicants can now access funding with 1-500 FTEs and $100k-$100M in annual revenues.

Social Finance Fund:

Canada’s government will invest up to $755 million over the next 10 years to develop a Social Finance Fund. The fund is intended for charities, non-profits, and social purpose organizations to access financing and connect with non-government investors. Not only will this help social organizations access funding to grow and support new projects, but it will also lessen their dependence on government support over time.

How to Access Canadian Government Funding in 2019

Canadian businesses and non-profits should prioritize accessing government funding programs in 2019. With more incentives becoming available at the federal level, it’s easier to find grants and repayable funding that can support your upcoming strategic projects.

Now is the ideal time to plan your projects and apply for funding. To continue learning about your funding potential, please register for an upcoming government funding webinar.