Today (November 4th, 2025) marked the release of the Federal budget under Mark Carney. With his focus on business and innovation, the proposed budget changes have significant impacts on Canada’s economy and businesses, and they did not disappoint!
The 2025 Federal Budget at a Glance
Several different mechanisms will be put in place to support innovators and businesses in Canada. With Carney’s background in Finance, it is not surprising that these budget implications are deeply technical in nature and focus on all aspects of building a stronger, more financially independent Nation.
Some highlights include:
- The extension of the ElevateIP program
- Improvements to the SR&ED program
- $1B to BDC for investment into Canadian growth-stage companies
- Programs and initiatives to attract international talent
- Funding and focus on AI infrastructure in Canada
- Cleantech tax credits expanded
- Reducing inter-provincial trade barriers
2025 Federal Budget: SR&ED Program Improvements
There are several proposed changes to the SR&ED program that will fuel Canadian innovation and further expand this already >$4B program in Canada. These changes are estimated to add an additional $440M in new annual support, which is expected to generate $1.2B in R&D activity. Here is a rundown on the proposed changes:
Increase of Enhanced Expenditure Limit to $6M
Raising the SR&ED expenditure limit means businesses can claim the higher 35% refundable credit on up to $6 million in R&D costs instead of $3 million. This gives growing companies larger refunds on their innovation spending.
Restoration of Capital Expenditure Eligibility
Many years ago, a company could claim capital expenditures as an expense for SR&ED purposes, and that went away for a while, but thankfully, this is coming back. There are many questions about what qualifies as a capital expenditure and what percentage of the expenditure can be included as an expense, and these questions are yet to be answered. While details of what this exactly means haven’t been released yet, this proposal will be significantly impactful for businesses with significant machinery, hardware and equipment costs used in testing.
Inclusion of Public Corporations.
It has long been a sore point for small-cap public companies that they do not qualify for the SR&ED enhanced rate (35%). Details are still needed to know what “eligible” public corporations are. We believe that it will be companies listed on a Canadian exchange that fall below a certain threshold.
Introduction of the Pre-Claim Approval Process
The pre-claim approval process allows companies to have certainty and clarity ahead of starting the project, whether or not their technical project qualifies for SR&ED. The CRA will most likely provide taxpayers a method to answer many questions in their MyBusiness account and then use AI-supported decision-making to determine whether the project technically qualifies. If it does, and the claim is selected for review, only the financial aspect of the project will be reviewed. This will save claimants up to 90 days in the review process. More details will come regarding exactly how this will be executed, but this could be a positive change to reduce SR&ED processing times and get clarity on eligibility.
Unlocking Capital and IP for Canadian Innovators
It is no secret that there is a lack of funding for growth-stage companies in Canada, and that, as a country, we struggle to produce IP at rates that we should. Here are some of the proposed changes that will help address these problems.
BDC’s $1B Venture and Growth Capital Catalyst Initiative
Funding to fuel growth-stage companies in Canada. This means more capital will flow into Canadian venture funds, giving scaling startups greater access to Series A–C investment without needing to seek foreign backers.
Extensions to ElevateIP, Patent Collective, and NRC IP Assist programs
These renewed programs give innovators affordable tools and funding to protect, manage, and commercialize their intellectual property, helping them compete globally with stronger IP portfolios. Concerns that ElevateIP would not be renewed have been put to bay with this exciting announcement that an additional $84M will be put towards this program.
Talent and Workforce Mobility
A strong innovation economy depends on skilled workers in our workforce. The 2025 Budget introduces major steps to attract top global talent, reduce barriers for foreign-trained professionals, and improve labour mobility within Canada.
International Talent Attraction Strategy
Training programs, infrastructure support and initiatives are being rolled out in 2026 to improve the recruitment and retention of trained, skilled international researchers and workers. It’s an opportunity to tap into global research networks without relocating operations abroad, which translates back to more SR&ED funding! It will also become simpler and faster to recognize international credentials for essential trades and skills.
2025 Federal Budget: In Summary
All in all, this budget promises focus on financial support and attention to Canadian businesses. While the full scope of what all of these proposed changes truly mean is still unknown, at this point, things look optimistic.
Increases and expansion to the SR&ED program, focus on IP, funding for Canadian business and AI innovation, as well as further support for attracting talent and improving the state of Canada’s workforce. These things take time, but it is great to see the focus that the Liberal government is putting on the Canadian economy.
