On Tuesday, March 19th, Finance Minister Bill Morneau released the 2019-2020 federal budget. The new budget includes good news for Canadian businesses looking to claim SR&ED tax credits and grants for their current and future projects.
What’s New in SR&ED?
The 2019-2020 budget proposes to repeal the use of taxable income as a factor in determining a CCPC’s annual expenditure limit for the purpose of the enhanced SR&ED tax credit. This measure applies to tax years that end on or after March 19, 2019.
As a result, small CCPCs with taxable capital of up to $10 million will be able to access the 35% refundable rate SR&ED credit regardless of their previous year’s taxable income. As a CCPC’s taxable capital begins to exceed $10 million, this access will gradually be reduced. This change will more effectively support growing small and medium-sized firms as they scale up.
Note: Under the current rules, the refundable 35% rate is capped at $3 million of qualifying SR&ED expenditures and is gradually phased out where taxable income for the previous tax year is between $500,000 and $800,000.
Investment in Government Funding Initiatives
The new federal budget has allocated $941.3 million in new funding for the 2019-2020 fiscal year. This funding will be delivered through strategic programs focused on the following initiatives:
- Investments in agriculture and the agri-food sector, as well as local food infrastructure
- Tourism development and related activities Business development opportunities for Indigenous communities
- Regional economic diversification across Canada for all sectors
- Acquisition and implementation of new capital and infrastructure solutions
- Investments in the steel and aluminum sectors
- Supporting innovation in the oil and gas sector through collaboration;
- Stimulation of a diverse western economy
Employment and Skills Training
- Attracting global talent for Canadian businesses
- Supporting the next generation of entrepreneurs; and
- Creating new jobs and promoting skills development.
Low-carbon and Green Initiatives
- Support for energy efficient and sustainable ventures.
What Does This Mean for Ayming Clients?
With the SR&ED changes announced during this budget release, Ayming’s CCPC clients with fiscal years ending after March 19, 2019, whose tax rate would have been reduced to 15% due to their previous year’s income being greater than $500K, will now be eligible for the 35% refundable tax credit rate. In addition, the government’s significant investment in grant initiatives across many areas creates further opportunities for clients looking to hire, train, innovate or invest in business growth or green projects. For more information on how the new budget impacts and can help fund your current and future projects, please contact your Ayming consultant or email us at email@example.com