Election year budgets are always a chance for the government in power to shower both taxpayers and businesses with presents. Nevertheless, I confess, based on past budgets, this columnist was pleasantly surprised by the renewed commitment of the Liberal government to encourage innovation in the Small to Medium Sized (SME) business community. Let’s see what’s in the budget for your business.
There are two primary innovation funding programs for business in Canada, IRAP (Industrial Research Assistance Program) and SR&ED (Scientific Research and Experimental Development). Together, they make up the majority of all grants, innovation tax credits and cash provided by the federal government for all incentivized programs. Both programs have wide support amongst both the Liberal and the Progressive Conservative parties. IRAP was introduced in the 1950’s and has continued to be funded by all federal governments. SR&ED was introduced in the 1990’s and it too has had the commitment of both federal parties who have been in power since that introduction.
Budget 2019 increased the funding available for SMEs within the SR&ED program. Previously, if an SME earned more than $800,000, they were not eligible for the premium 35% refund rate for their innovation projects, but only 15%. In other words, if your business spent $100,000 on innovation, regardless of earned income, Budget 2019 has just granted you an additional $20,000 to support that innovation. Interestingly, Budget 2019 did not eliminate the capital threshold, which states that companies with capital valued at greater than $50 million are not eligible for the premium rate. In other words, this SR&ED additional funding is specifically for SMEs, not large corporations.
Stock Options for Start-Ups
Budget 2019 limits the availability of stock option deductions for most companies, excluding “startups and rapidly growing Canadian business”. There are not many details in the budget about this measure, but clearly, the federal government is encouraging start-ups and SMEs to invest in their human resources. As with most budgets, Budget 2019 states that stock options issued before the budget announcement would not be subject to the new regime.
Accelerated Capital Cost Allowance
Budget 2019 confirms the intention of the government to proceed with the capital cost allowance (CCA) acceleration measures originally announced in their Fall Economic Statement. These are:
- Full expensing for the cost of manufacturing and processing (M&P) machinery and equipment on a temporary basis
- Full expensing for the cost of specified clean energy equipment on a temporary basis
- A temporary accelerated investment incentive
This measure allows your business to immediately write-off the cost of M&P equipment, and specifically, clean energy equipment. It also includes an accelerated investment incentive of up to three times the normal first-year CCA deduction for other capital assets subject to CCA regime, with few exceptions. It’s time to go back and re-calculate your return on investment for that new machinery you’ve been contemplating. It might just be cost justifiable under these new measures.
Canada Training Credit
Every budget always has something for workers. Budget 2019 is no exception. Every tax year beginning in 2019, workers with income that does not exceed the third tax bracket (currently $147,667) can accumulate $250 per year to go against eligible tuition and fees paid to learn new skills, or enhance existing skills.
In the December 2018/ January 2019 column, we discussed Futurepreneur, a program targeting young entrepreneurs to access funds to start or buy a business. Budget 2019 has added $38 million over the next five years to keep the program going.
Budget 2019 is clearly SME-friendly. Companies in the graphics, printing and associated support industries now have even more opportunities to improve their shop floor, develop new and innovative products and processes, train their workforce and take advantage of funding opportunities to boost their business.
While all of the above-mentioned opportunities exist for you, they also exist for your competitors. Make sure you get your fair share before the funds have already been allocated to others and you are too late. When it comes to government funding support, it’s the professionally ready early bird gets the worm.