SR&ED Updates: Bigger Refunds, Broader Eligibility, and New Opportunities for Canadian Businesses

August 27, 2025

SR&ED Tax Credit Updates: Key Changes in the 2024 Fall Economic Statement

The federal government’s 2024 Fall Economic Statement brought important changes to the Scientific Research and Experimental Development (SR&ED) tax incentive program—Canada’s largest source of R&D funding.

For small and medium-sized enterprises (SMEs), these updates mean more access to refundable tax credits, greater flexibility in claiming innovation-related costs, and new opportunities to reinvest in growth. But they also come with new compliance considerations. Here’s what you need to know.

Key Changes at a Glance

The proposed measures significantly expand the scope and generosity of the SR&ED program.

1. Higher Refundable Credit Limits for CCPCs

The enhanced 35% refundable SR&ED credit limit increases from $3 million to $4.5 million in annual eligible expenditures.
This means a qualifying Canadian-controlled private corporation (CCPC) can now claim up to $1.575 million per year in refundable credits (previously capped at $1.05 million).
The phase-out thresholds based on taxable capital also increase, from $10M–$50M to $15M–$75M, allowing more mid-sized companies to remain eligible.

2. Expanded Access for Canadian Public Corporations

For the first time, eligible Canadian public corporations will also qualify for the enhanced 35% refundable credit on up to $4.5 million of expenditures.
Instead of taxable capital, their access will phase out based on gross revenue between $15M and $75M, using consolidated financials for corporate groups.

3. Optional Revenue-Based Test for CCPCs

CCPCs can elect to use the same gross revenue phase-out as public corporations, rather than taxable capital, offering greater flexibility in structuring eligibility.

4. Capital Expenditures Are Back

Capital expenditures (equipment and other depreciable assets) will once again qualify for both deduction against income and the SR&ED tax credit.
This restores a major funding avenue removed in 2013 and is especially valuable for manufacturers, labs, and tech companies investing heavily in new equipment.

Effective date: These changes apply to taxation years beginning on or after the date of the 2024 Fall Economic Statement (November 21, 2024).

Why This Matters for SMEs

For many innovative Canadian businesses, these updates represent a major opportunity:

More refundable cash back. A larger expenditure limit and broader eligibility mean higher refunds that can be reinvested directly into R&D, hiring, and scaling operations.
Support for scale-ups. Companies nearing the old $3M/$10M thresholds can now continue to benefit longer before phasing out.
Recognition of capital investment. Equipment-heavy industries can finally recover part of their investment costs through SR&ED credits again.
Public companies included. This could change the funding landscape for larger Canadian tech and life sciences firms, many of which previously only qualified for the 15% non-refundable credit.

A Practical Example

Consider a Toronto-based advanced manufacturing company with $4M in annual SR&ED-eligible expenditures.

Under the old rules:
- Only the first $3M qualified for the 35% refundable credit = $1.05M back.
- The remaining $1M qualified for a 15% non-refundable credit = $150K, but this could only be used to reduce future taxes payable.
Under the new rules:
- The first $4.5M now qualifies at 35% refundable.
- On $4M of expenditures, the company could receive $1.4M back—a $250K cash-flow improvement compared to the old system.

For a growing SME, that extra quarter-million could mean a new piece of equipment, funding an additional R&D hire, or extending runway in a competitive market.

Risks and Considerations

While these updates are positive, businesses should also be mindful of:

Increased CRA scrutiny. Larger refundable amounts may lead to more frequent and detailed reviews. Proper documentation of SR&ED projects will be essential.
Complex group rules. Public corporations and CCPCs that are part of corporate groups will need to carefully track shared expenditure limits.
Capital asset eligibility rules. Not all equipment purchases will automatically qualify; businesses must meet “all or substantially all” SR&ED use tests or navigate “shared-use” rules.

How Kreston GTA Can Help

The SR&ED program is one of Canada’s most generous incentives, but it’s also one of the most closely audited. With these new rules, the stakes—and opportunities—are higher than ever.

At Kreston GTA LLP, our SR&ED and Incentives team helps businesses:

Maximize refundable credits under the updated rules.
Ensure compliance with CRA requirements and avoid costly disputes.
Identify eligible capital expenditures and structure claims effectively.
Navigate group eligibility and election choices to preserve SR&ED access.

Final Takeaway

The 2024 Fall Economic Statement signals stronger government support for Canadian innovation. With higher refundable limits, the return of capital expenditure eligibility, and broader access for public companies, the SR&ED program is more valuable than it has been in over a decade.

Now is the time for SMEs and scale-ups to revisit their SR&ED strategy.

Contact Kreston GTA LLP’s SR&ED team today to discuss how these changes could impact your next claim and unlock new cash flow opportunities for your business.

LinkedIn Post: SR&ED Program Updates – Bigger Refunds, Broader Access

🚀 SR&ED Program Updates: Bigger Refunds, Broader Access

The federal government’s 2024 Fall Economic Statement brings big news for innovative Canadian businesses: major enhancements to the Scientific Research & Experimental Development (SR&ED) program.

Here’s what you need to know 👇

Key Highlights

✅ Higher Refundable Limits for CCPCs
- Enhanced 35% refundable SR&ED credit limit increases from $3M → $4.5M in eligible expenditures.
- Maximum refundable credit rises to $1.575M per year.
- Phase-out thresholds increase to $15M–$75M of taxable capital, keeping more mid-sized companies eligible.
✅ Public Companies Now Included
- For the first time, eligible Canadian public corporations can claim the enhanced 35% refundable credit on up to $4.5M of expenditures.
- Access phases out based on gross revenue ($15M–$75M) rather than taxable capital.
✅ Capital Expenditures Return
- Equipment and other depreciable assets will once again qualify for both SR&ED deduction and tax credit, restoring a key funding avenue for manufacturers, labs, and tech innovators.

Why It Matters for SMEs

More cash refunds = stronger reinvestment in people, equipment, and growth.
Scale-up support = extended eligibility for companies nearing old thresholds.
Broader inclusion = public corporations and capital-intensive sectors benefit.

📊 Example: A manufacturer with $4M in eligible SR&ED expenditures could now receive $1.4M back, compared to $1.2M under the old rules — a $250K boost in refundable funding.

What to Watch Out For

Increased CRA scrutiny with higher refundable claims.
Complex rules for corporate groups and capital asset eligibility.
Strategic elections (taxable capital vs. revenue test) may impact your credit access.

How Kreston GTA LLP Can Help