The federal government of Canada has unveiled Budget 2024, emphasizing measures to enhance productivity and foster innovation with the goal of creating good-paying jobs for Canadians, particularly Millennials and Gen Z.
A key component of the budget is the introduction of the Canadian Entrepreneurs’ Incentive, which is designed to assist innovative entrepreneurs in scaling their businesses, particularly in the technology and manufacturing sectors. This incentive reduces the inclusion rate to 33.3% on a lifetime maximum of $2 million in eligible capital gains, leading to reduced taxes on up to $6.25 million in capital gains.
In addition, the budget includes an Accelerated Capital Cost Allowance, which will help businesses by reducing costs when investing in productivity-enhancing assets, such as computers and data network infrastructure. This measure is expected to encourage businesses to adopt cutting-edge technologies that can improve workforce productivity.
“Our government is providing entrepreneurs and business the tools they need to accelerate innovation across the country. Budget initiatives such as the Canadian Entrepreneurs Incentive and the Accelerated Capital Cost Allowance are key to unlocking Canada’s long-term prosperity and promoting sustainable innovation,” said François-Philippe Champagne, Minister of Innovation, Science, and Industry.
The government also plans to use regulatory sandboxes with amendments to the Red Tape Reduction Act. This will create exemptions to existing legislation and regulations, reducing bureaucratic obstacles and facilitating innovation.
Nearly $5 billion will be allocated for enhanced federal research support, aimed at developing modern research facilities, providing grants, and supporting post-secondary education. This includes $2.6 billion for core research grants and scholarships, supporting breakthroughs in climate action, health emergencies, artificial intelligence, and psychological health.
The Venture Capital Catalyst Initiative will receive $200 million over two years to increase access to venture capital for equity-deserving entrepreneurs and to invest in underserved communities. The budget also proposes increasing the Lifetime Capital Gains Exemption from $1,016,836 to $1.25 million for the sale of small business shares and farming and fishing property, effective June 25, 2024.
Additionally, the budget outlines the modernization of the Scientific Research & Experimental Development tax incentives with an additional $600 million over four years, plus $150 million annually. A $2.4 billion package is included to accelerate job growth in Canada’s AI sector, increasing productivity by helping researchers and businesses develop and adopt AI responsibly.
Federal research support will be further enhanced by a new capstone research funding organization to better coordinate research while maintaining existing granting councils. The Strategic Science Fund will support 24 third-party science and research organizations with up to $858.7 million starting in 2024.