The Measure
Prime Minister Mark Carney announced the Productivity Mega Deduction at the first Canada Investment Summit in Toronto on 15 September 2026. The Department of Finance released draft legislative proposals and a backgrounder the same day.
The measure makes immediate expensing permanent and raises the share of depreciable assets that qualify from roughly 15 per cent to more than 65 per cent. The covered list names fibre-optic cable, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft and vehicles, patents, rail track, bridges and roads.
Eligible depreciable property must be acquired on or after 15 September 2026.
The Rate Change
The government states that Canada's marginal effective tax rate on new business investment falls from roughly 13 per cent to 6.4 per cent. The announcement describes that as the lowest rate of any major economy and less than half the United States rate.
The Department of Finance backgrounder estimates an incremental fiscal cost of $36 billion over five years from 2026-27. It projects economic activity of 1.4 to 3 times the federal cost, an average annual output of up to around $22 billion, and long-term employment gains of up to 80,000 jobs a year ten years out.
What a Hotel Project Can Claim
Buildings in classes 1(q) and 3(k) sit on the excluded list, and the exclusion covers additions and alterations to those buildings. Hotel building shells and building-level renovation fall outside immediate expensing.
Manufacturing and processing buildings keep their route under the Budget 2025 Productivity Super-Deduction. Certain vehicles in classes 10 and 10.1, property in classes 14 and 14.1, class 51 property and the property in Schedules V and VI of the Income Tax Regulations also sit outside the measure.
Furniture, fixtures and equipment do not appear on the published exclusion list. Computer equipment stands on the covered list.
A renovation budget weighted towards furnishing and equipment therefore reaches more of its cost through the measure than a budget weighted towards structural work.
The Association's Reading
Hotels Canada published its response on 15 September 2026, the day of the announcement. Its statement calls the deduction significant news for hotel investors and operators in Canada, and says the measure has the potential to improve the economics of hotel development, renovation and reinvestment across the country. The statement says the association is working with tax experts and federal officials on a fuller assessment.
The association's 2026 Pre-Budget Submission to the House of Commons Standing Committee on Finance carried its first recommendation in these words: "Introduce an Accelerated Capital Cost Allowance with 100% write off in the first year for new hotel buildings, renovations, and equipment." The association's October 2025 Hotel Investment Climate brief carried the same ask.
New hotel building construction sits outside the measure as drafted.
The Supply Backdrop
The submission sets out the market case behind the ask. It puts Canada's hotel stock at approximately $74 billion in capital assets, with $3.4 billion in the pipeline, and reports occupancy in major markets averaging in the low 70 per cent range.
It counts 243 hotel projects abandoned in Canada since 2019, including 95 in the year before the submission, at a loss of 11,210 rooms and about $5 billion in capital investment. It projects a shortfall of nearly 20,000 hotel rooms by 2030 at an estimated cost of $5 billion annually.
It puts the sector at $32 billion a year in economic contribution, $13 billion in annual government revenue and 320,000 employees.
The measure sits in draft legislation.