Canada SR&ED Changes 2025: Draft Legislation Released

New draft legislation for SR&ED is now released. They include a proposed 50% boost to eligible expenditures and restored capital expenditure eligibility which could soon make R&D investments claimable that have been completely ineligible since 2014!

This represents the most significant evolution of Canada's SR&ED program since capital expenditures were eliminated in 2014. For AI founders who've been navigating the program's limitations—watching hardware investments sit outside eligible expenses — this draft legislation signals a potential levelling of the playing field. The same holds true for manufacturing companies investing in automated production systems, robotics, and Industry 4.0 technologies, or engineering firms developing specialized testing equipment and leasing critical R&D machinery. The timing coincides with unprecedented infrastructure demands across tech sectors, where model training hardware, advanced manufacturing systems, and compute-intensive research have become table stakes for competitive innovation.

Start dusting off those R&D investment plans

Remember those SR&ED program enhancements we wrote about in December? Yes, the same ones that spent a bit of time in limbo since December. They appear to have survived a federal election. On August 15, 2025, the Department of Finance released draft legislation that includes the full SR&ED package: the $4.5M expenditure ceiling (up from $3M) for the enhanced federal rate, restored capital expenditure eligibility, increased taxable capital phase-out thresholds. and extended refundable credits for small public corporations.

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Of all these changes, we believe that the return of capital expenditures to the SR&ED program will have the most significant impact to Canadian innovators of all sizes and industries. It is the right step towards boosting our competitiveness in the global R&D landscape! So, those research infrastructure investments and R&D hiring plans can finally move from "someday when the rules change" to "let's run the numbers". The 50% boost to eligible expenditures combined with restored capital expenditure eligibility means you can now claim SR&ED on investments that were completely ineligible since 2014. And for growth-stage companies, these changes should mark a fundamental shift in how you fund innovation while maintaining the aggressive technical pace that your market demands. 

A few more tidbits on capital expenditures

For CCPCs claiming the enhanced 35% rate, capital expenditure credits will only be 40% refundable (versus 100% refundable for current expenditures like salaries). So, if you bought a $100K equipment that is used for SR&ED purposes, it generates a maximum of $35K in credits, but only $14K comes back as cash. An important caveat as you plan ahead for R&D capital expenditures: If you sell or repurpose SR&ED capital property, recapture rules will apply to recover previously claimed benefits — don't forget to factor this into your equipment lifecycle planning.

Timelines to keep in mind

These changes affect 2025 SR&ED claims for companies whose taxation years began after December 15, 2024 — meaning if your fiscal year started January 1, 2025, you're already operating under the new rules (once the bill is passed into law).

Speech-to-speech models are getting way cooler (& so did your SR&ED opportunities)

The What?

Microsoft's MAI-Voice-1 and OpenAI's GPT-Realtime just dropped, and they're game-changers for voice AI. MAI-Voice-1 cranks out a full minute of high-fidelity speech in under one second on a single GPU - check out their playground here. Some usecases to spur your creativity are custom guided meditation, interactive voice experiences into your existing AI workflows and storytelling. 

GPT-Realtime lets you build voice agents that respond in natural, expressive speech with seamless language switching—all with direct audio processing that skips the text conversion step entirely. Here’s a neat demo from their launch announcement. 

The So What?

These aren't just incremental improvements—they're opening entirely new product categories. Think real-time multilingual customer support, voice-first enterprise tools, or accessibility applications that were impossible with previous latency constraints. For founders, this represents a rare moment where the underlying technology has advanced enough to make previously theoretical use cases commercially viable.

For SR&ED-focused teams:

This is where it gets interesting for Canadian tech companies. While vanilla integrations of these off-the-shelf models won't qualify for SR&ED, the innovative applications you build on top of them absolutely can. Developing novel voice interaction patterns, creating industry-specific voice agents that require domain expertise, or solving the technical challenges around real-time audio processing in complex environments—that's all highly claimable territory. The key is documenting your systematic investigation into how these models can be adapted, combined, or enhanced for your specific use case. When you're pushing beyond integration into uncharted technical territory, you're creating exactly the kind of technological advancement that SR&ED rewards.