Certain sectors benefit disproportionately from the 2026 policy reversal due to high hardware requirements.
Industry | Key Capital Asset | Useage |
|---|---|---|
Machinery Manufacturing | Multi-axis CNC Prototyping Units | Replaces out-of-pocket R&D shop costs |
BioTech & Life Sciences | Mass Spectrometers & Sequencers | Critical for lab-to-floor scaling phases |
Equipment Manufacturing | High-Precision SMT Prototyping Lines | Solves thermal dissipation limits in miniaturized circuits |
Agriculture & AgTech | Autonomous Field Testing Robots | Eligible for 35% credit if use is ≥90% R&D |
Construction Tech | 3D Concrete Printers / Layout Robots | Resolves structural integrity uncertainty in modular R&D |
CleanTech | Carbon Capture Pilot Reactors | Stacks with 2026 Clean Tech ITCs |
New for 2026
As of April 1, 2026, major capital purchases can undergo “Elective Pre-Claim Consultation” for faster ROI.
SR&ED Capital Expenditures are costs for depreciable property acquired on or after December 16, 2024, that is used at least 90% of the time (the ‘All or Substantially All’ test) for SR&ED activities in Canada. Eligible Canadian-Controlled Private Corporations (CCPCs) can claim a 35% refundable Investment Tax Credit (ITC) on these expenditures, up to a $6M annual expenditure limit.
Step 1: Timeline Test → Step 2: Asset Classification → Step 3: 90% ASA Test → Step 4: Why & How Validation → Step 5: Pre-Approval Option
To defend the 90% rule, replace anecdotal evidence with contemporaneous digital logs. Track all operating hours in real-time, linking machine use to specific technological uncertainties. A successful 2026 audit proves that 90% of active time, including R&D setup but excluding idle periods, was dedicated to experimental development. Detailed, timestamped entries create the necessary audit trail to justify the 35% refundable credit on high-value hardware.
Depreciable property acquired on or after December 16, 2024, that is used in Canada for SR&ED activities. This includes equipment, machinery, and scientific instruments. The asset must meet the “All or Substantially All” (ASA) threshold; at least 90% of its use must be directly attributable to SR&ED. Non-depreciable assets such as land do not qualify.
Yes, but only if SR&ED use meets the 90% ASA threshold. If an asset splits time between R&D and commercial production and SR&ED use falls below 90%, the asset becomes fully ineligible. There is no partial credit for mixed-use assets that fail the ASA test.
If SR&ED use drops below 90% during the fiscal year, the asset no longer qualifies for the SR&ED capital expenditure ITC for that year. CRA may also reassess prior claims if usage patterns change significantly. This makes real-time usage tracking critical throughout the asset’s operational life.
Generally, no. SR&ED capital expenditure rules apply to owned depreciable property. Lease payments may qualify as SR&ED overhead under the traditional method or as eligible expenditures in limited circumstances, but the capital expenditure ITC is specifically tied to ownership of the asset. Consult GrowWise to assess your specific lease structure.
The $6M annual SR&ED expenditure limit eligible for the 35% refundable ITC must be shared among all associated corporations in a group. Each dollar claimed by one company reduces the limit available to others. Companies with taxable capital exceeding $10M face a grind-down of the limit, and it phases out entirely at $50M.
CRA expects contemporaneous documentation, including purchase invoices, asset classifications (CCA class), and real-time logs linking machine operating hours to specific SR&ED projects and technological uncertainties. Records should show that 90% of active use was SR&ED-related. After-the-fact reconstructions are heavily scrutinized and frequently rejected during audits.
