What’s Changing?
Budget 2025 introduces a proposed immediate expensing provision for manufacturing or processing buildings—a move designed to accelerate capital investment in the industrial sector. Property must be acquired on or after November 4, 2025, and first used for manufacturing or processing goods before 2030. (canada.ca)
Under these rules:
- Eligible buildings (or eligible additions/alterations) are eligible for a 100% deduction in the first taxation year where the building is used for manufacturing or processing, provided 90% of the floor space is so used. (canada.ca)
- After 2030, this full expensing begins to phase out: 75% write-off for buildings first used in 2030-31; 55% in 2032-33. No enhanced deduction for use after 2033. (canada.ca)
Who Should Care?
This measure targets businesses in manufacturing, processing, or those investing in eligible industrial real estate:
- Business owners planning new factories or industrial space
- Companies expanding or renovating existing plants with additions or alterations
- Investors or developers building manufacturing facility space with gaps in utilization where 90% threshold can be met
Practical Steps & Examples
- Example 1: A small machine shop acquires a building on December 1, 2025 and uses it entirely for manufacturing. Under the new rules, full cost is deductible in its first taxation year (2025), reducing taxable income significantly.
- Example 2: A company constructs warehouse space in 2029 but only uses part of it—if less than 90% is for manufacturing, immediate expensing doesn’t apply; they may rather use phased write-offs.
Watch Out For These Key Details
- Ownership restrictions: the taxpayer (or someone related) must not have previously owned property acquired for use. Properties acquired via tax-deferred rollovers may be ineligible. (canada.ca)
- Recapture rules: if usage changes and falls below threshold, some of the deduction may need to be clawed back. (canada.ca)
Actionable Advice
- Identify eligible buildings or alterations now—get engineering/architectural plans to show ≥90% floor utilisation for manufacturing/processing.
- Time the acquisition correctly—on or after November 4, 2025—and confirm first use before 2030.
- Structure ownership to satisfy the “never previously owned” test.
- Maintain documentation for usage, structural changes, and ownership to prepare for review or audit.
- Plan cash flow accordingly—large upfront deduction implies lower taxable income in early year, impacting carry-forwards or interest deductions.
This proposed measure offers a powerful incentive to industrial investors—massive deductions and faster return-on-capital, but if you don’t meet all requirements, backtracking could cost you. Be sure you tick every box.