Finance Minister Francois-Phillipe Champagne introduced Budget 2025 – Canada Strong on November 4th, 2025. The budget’s central theme is a new Capital Budgeting Framework, which separates operational spending from capital investments. This budget confirmed several significant tax measures previously announced in the 2024 Fall Economic Statement and August 2025 draft legislation.
Core Insights
- Budget 2025 – Canada Strong focuses on:
- Innovation and productivity: strengthened SR&ED and manufacturing incentives.
- Clean economy investment: multiple clean technology and energy tax credits.
- Affordability: middle-class tax cuts and GST removal for first-time home buyers.
- Fairness and simplification: modernized transfer pricing, anti-avoidance measures, and tax streamlining.
Further, the government continues to support long-term growth through R&D, clean energy, and tax integrity reforms.
Business Tax
Scientific Research & Experimental Development (SR&ED)
- SR&ED expenditure limit raised from $4.5M to $6M (for taxation years beginning on/after Dec 16, 2024).
- Enhanced 35% refundable credit extended to eligible Canadian public corporations (ECPCs) and capital expenditures.
- CRA administrative reforms (from Apr 1, 2026):
- Elective pre-claim approval process (will cut processing to 90 days from 180 days).
- Simplified claim forms and reduced documentation burden with streamlined process.
Clean Economy Investment Tax Credits
The existing refundable investment tax credits available include:
- Carbon Capture, Utilization & Storage (CCUS): 37.5 to 60%, full rates extended to 2035.
- Clean Technology: 30%.
- Clean Hydrogen: 15 to 40%.
- Clean Technology Manufacturing: 30%.
The government will soon introduce legislation to implement the Clean Electricity investment tax credit and to strengthen the investment tax credits already in place. As this legislation moves forward, investors can rely on retroactive eligibility already being assured.
- Expanded Eligibility for Clean Economy ITCs:
- Clean Tech: adds waste biomass systems and small nuclear property.
- Clean Tech Manufacturing: adds antimony, indium, gallium, germanium, scandium.
- Clean Hydrogen: includes hydrogen from methane pyrolysis (Dec 16, 2024).
Manufacturing and Sector Changes
- Immediate expensing of new manufacturing buildings used before 2030 (100% deduction).
- Accelerated Investment Income (AII): The AII is reinstated and enhanced, providing a 1.5x first-year deduction for other capital properties (subject to the half-year rule).
- Critical Mineral Exploration Tax Credit: expands eligible minerals list to 12 new elements (to Mar 31, 2027).
- Agricultural cooperatives: tax deferral on patronage dividends extended to 2030.
- Canada Growth Fund included as eligible entity for Clean Electricity ITC; financing won’t reduce property cost.
Tax Integrity & Clarifications
- Canadian Exploration Expense: excludes economic feasibility studies.
- Compliance Order Penalty: Confirms the new penalty of up to 10% of the aggregate tax payable for the years in question if the CRA obtains a compliance order against a large corporation and the tax payable exceeds $50,000.
- Tiered corporate structures: limits deferral of refundable tax through staggered year-ends.
The new anti-deferral rule will postpone dividend refunds for corporate groups with differing year-ends to eliminate temporary deferrals on investment income. This measure will require CCPC groups to reassess their dividend planning for taxation years starting after November 4, 2025
Personal Tax
Middle-Class Tax Cut
- First marginal rate reduced from 15% → 14% (effective July 1, 2025). Applies to income up to $57,375; benefits ~22 million Canadians.
- Non-Refundable Tax Credits (NRTCs): The rate used to calculate most federal NRTCs (e.g., Basic Personal Amount) is also reduced to 14.5% for 2025, which may negatively impact certain taxpayers.
- Lifetime Capital Gains Exemption (LCGE): Confirms the increase in the LCGE for qualified small business corporation shares and qualified farm or fishing property to $1.25 million (from $1,016,836), effective for dispositions on or after June 25, 2024.
- Canadian Entrepreneurs’ Incentive (CEI): Confirms the introduction of the CEI, which provides a reduced capital gains inclusion rate (to 33.3%) on a lifetime maximum of $2 million. This is phased in by $200,000 per year, starting in the 2025 tax year.
Housing & Affordability
- GST eliminated on new homes up to $1M; reduced GST for homes $1M–$1.5M for first-time buyers.
New Targeted Credits
- Personal Support Workers (PSW) Tax Credit (2026–2030):
- Refundable 5% of eligible earnings, up to $1,100 annually, excluding BC, NL, and NWT.
- Top-Up Tax Credit (2025–2030):
- Ensures no one pays more due to lower federal credit rate post–tax cut.
System Modernization
- Automatic tax filing (from 2026): CRA can file returns for low-income Canadians (information-only income).
Other Personal Measures
- Home Accessibility Credit: no double counting with Medical Expense Credit (from 2026).
- 21-Year Trust Rule: expanded anti-avoidance for indirect property transfers (effective Budget Day).
- Canada Carbon Rebate: ends eligibility for returns filed after Oct 30, 2026.
Other Changes
Tax Integrity & Compliance
- Reverse charge mechanism introduced to combat carousel GST/HST fraud (starting in telecom sector).
- Non-Compete Agreements: The government will propose amendments to the Canada Labour Code to restrict the use of non-compete clauses in employment contracts for federally regulated businesses.
Tax Simplification
- Luxury Tax on aircraft and vessels eliminated (effective day after Budget Day), but remains on vehicles valued over $100,000.
- Underused Housing Tax repealed starting 2025 calendar year.
- Consolidation of qualified investment rules to simplify compliance and administration.
Please reach out to your Ford Keast representative if you have any questions related to any of the above.
References
Department of Finance Canada. (2025, November 4). Budget 2025: Building Canada Strong. Government of Canada. https://budget.canada.ca/2025/report-rapport/intro-en.html
