Budget 2025: What it means for the SR&ED Tax Incentive Program

On November 4, 2025, the Canadian government delivered the federal budget for 2025-2026. The budget, titled “Canada Strong”, focuses on managing the forecasted fiscal deficit while prioritizing infrastructure investment, enhancing productivity, and employing strategic responses to global trade disruptions.

Notably, the federal budget includes one of the biggest enhancements to the Scientific Research & Experimental Development tax incentive program in decades.

In this article, we’ll go over the changes to the SR&ED program, how it may affect your business, and what you can do to maximize it.

What are the changes to SR&ED?

In the federal 2024 Fall Economic Statement, proposals to enhance the SR&ED program by increasing the amount of expenditures that could be eligible for the enhanced 35% refundable SR&ED investment tax credit (ITC), expanding its access to more companies, and restoring eligibility for capital expenditures was initially presented.

These proposals were seen to be confirmed in Budget 2025, in addition to other increases. Below is a run down of all the major changes:

• SR&ED expenditure limit increased to $6 million. From $3 million, the annual expenditure limit for Canadian-private corporations (CPCCs) is raised to $6 million for taxation years beginning on or after December 16, 2024. This means that eligible corporations can claim up to $2.1 million annually in enhanced refundable tax credits at the 35% rate.
• Expanded phase-out thresholds. Prior-year taxable capital boundaries have been increased to $15-$75 million (from $10-$50 million).
• Expanded eligibility. The enhanced credits are now available to eligible Canadian public corporations, not just Canadian-controlled private corporations (CPCCs), allowing access for innovation-centered listed firms.
• Restoration of capital expenditures. Properties acquired or after December 16, 2024 are once again eligible for both the deduction against income and investment tax credit components. This means businesses can now claim SR&ED credits on:
  
  • Machinery and equipment purchased for research & development
  • Testing and prototyping equipment or machinery
  • Specialized tools
  • Property acquired specifically for research purposes

In addition, companies can also expect that starting April 1, 2026, reforms to administering the SR&ED program will take effect. These reforms include:

• Pre-claim approval process. Businesses can obtain up-front technical approval of their eligible SR&ED projects before incurring costs, increasing certainty for innovators and their investors.
• Faster processing. Claims requiring expenditure review will be processed in 90 days (down from 180 days).
• AI-powered reviews. Artificial intelligence will be used to avoid unnecessary audit interventions for low-risk claims and streamline the review process.
• Streamlined requirements. Burdensome information requirements will be eliminated.

What does this mean for your business?

The overall changes represent a $440 million ongoing investment in Canadian innovation. For businesses conducting research & development, maximizing the most significant enhancement to the SR&ED program in years is incredibly vital.

Getting a better understanding of these changes will ensure that your business gains competitive advantage through a reduction in R&D costs and an increase in cash flow from the improved credit processing.

What can you do now?

Despite the admittedly good changes, SR&ED claims remain to be complex. We recommend reviewing your research & development activities to see if you qualify for higher SR&ED credits starting immediately.

As opportunities like this need immediate action and strategic planning, we recommend scheduling a consultation with SR&ED experts to calculate and assess your potential claim value.

At Grant Fund Pro, our expert consultants have analyzed every detail of the innovation measures to ensure that we can successfully manage the whole claims process on your behalf.

Don’t leave money on the table and reach out to one of our experts for a free consultation to start the process.