Last updated: Jan. 3, 2025 

2024 Fall Economic Statement: Key Takeaways for Canadian Farmers and Small Business Owners

The Canadian government’s 2024 Fall Economic Statement (FES) was released on December 16, 2024, and outlines various initiatives to strengthen the economy and support key sectors, including agriculture and small businesses.  

The 2024 FES introduces several measures that could impact farmers and small business owners. This blog post will examine some of those key initiatives. 

Economic Outlook & Fiscal Position 

The Fall Economic Statement reports the following fiscal projections: 

• Current federal deficit stands at $61.9 billion for 2024-25, significantly higher than originally projected
• Federal debt-to-GDP ratio is expected to move from 41.9% (2024-25) to 38.6% (2029-30)  
• Government projects the deficit will fall below 1% of GDP in 2026-27  
• Canada currently maintains its AAA credit rating 

Key economic indicators show: 

• Inflation has remained within the Bank of Canada’s target range throughout 2024 
• The Bank of Canada has cut interest rates five consecutive times in 2024, bringing the policy rate to 3.25% 
• Private sector economists predict rates will reach 2.75% by mid-2025 

Canada Pension Plan (CPP) Changes 

The 2024 FES outlines several updates to the Canada Pension Plan (CPP) as part of the 2022-24 Triennial Review. Effective January 1, 2025, these changes aim to enhance benefits for contributors and their families while maintaining retirement security for Canadian workers. Key updates include: 

• Death Benefit Enhancement: A more significant death benefit will be provided for specific contributors to better support families during loss. 
• Family Benefits: Part-time students will receive a new partial children’s benefit. Eligibility for the disabled contributors’ children’s benefit will also be extended to parents who reach age 65. 
• Survivor Pension Eligibility: Eligibility for a survivor pension will end for individuals legally separated after a division of pensionable earnings. 

These changes build on previous CPP enhancements, including the phased increase in retirement benefits initiated in 2019 under the 2016 agreement. Employers and employees should prepare for these updates, which aim to provide more comprehensive support for Canadian workers and their families.  

New Mortgage Rules and Housing Affordability 

The 2024 FES outlines several new mortgage rules and initiatives aimed at lowering the cost of homeownership and improving access to housing: 

Lower Down Payments and Lower Mortgage Payments 

The government is introducing measures to reduce down payment requirements and lower mortgage payments. These changes aim to make homeownership more accessible, particularly for first-time buyers: 

• Increasing the maximum amortization period for insured mortgages from 25 to 30 years for first-time homebuyers.  
• Allowing for lower down payments while maintaining prudent underwriting standards. 

Removing the Stress Test at Mortgage Renewal 

For homeowners with uninsured mortgages, the mortgage stress test at renewal will be removed for those switching from one federally regulated lender to another. This will allow homeowners to shop around for better rates without facing additional qualification hurdles, potentially leading to lower mortgage payments for some homeowners. 

Energy Retrofits with $40,000 Interest-Free Loans 

While not strictly a mortgage rule, the government offers 10-year interest-free loans of up to $40,000 through the Canada Greener Homes Loan Program for energy-efficient home renovations. The loan is only available for eligible retrofits that energy advisors have recommended.  

Scientific Research and Experimental Development (SR&ED) Program Update 

The Fall Economic Statement 2024 proposes several enhancements to the Scientific Research and Experimental Development (SR&ED) tax credits aimed at boosting innovation and productivity in Canadian businesses: 

• Increasing the annual expenditure limit for enhanced tax credits (of 35%) from $3 million to $4.5 million for Canadian-controlled private corporations. 
• Raising the taxable capital phase-out thresholds for the enhanced credit from $10 to 50 million to the extended threshold of $15 to 75 million. 
• Extending the enhanced refundable SR&ED tax credit to Canadian public corporations. 
• Restoring the eligibility of capital expenditures for both the income deduction and investment tax credit components of the SR&ED program. 

These changes are effective for taxation years beginning on or after the date of the Fall Economic Statement, with capital expenditure eligibility applying to property acquired on or after this date. 

The statement indicates that these changes are the first step in a series of reforms to the SR&ED program. Further details on program administration updates to qualified expenses will be announced in Budget 2025. 

Canada Carbon Rebate for Small Businesses 

The Canada Carbon Rebate for small businesses was announced in Budget 2024 for Canadian-Controlled Private Corporations (CCPCs), resident of designated provinces. The FES proposes a few modifications for fuel charge years for 2024-2025 and later, including: 

• Small businesses with 1 to 20 employees will qualify for a payment equivalent to having 20 employees, ensuring a consistent base rebate amount. 
• Businesses with over 300 employees will see their rebate amounts reduced as their workforce approaches 500. 
• Cooperative corporations and credit unions will now be eligible for the rebate. 

Rebates will continue to be issued automatically to eligible entities via direct deposit or cheque, separate from CRA tax refunds. Only eligible entities that have filed their tax returns will receive these automatic payments. 

Expanded Capital Gains Rollover for Business Investment  

The government plans to introduce new rules around Capital Gains Rollover, allowing individuals to defer taxation on capital gains realized on qualifying dispositions of Eligible Small Business Corporation (ESBC) shares. The current eligibility criteria, including common shares, purchase timelines, and value threshold, can be challenging. 

The FES proposes the following revisions to these existing rules: 

• The period to acquire replacement shares would expand to include the entire year of disposition and the whole calendar year after the year of disposition. 
• The definition of an ESBC share would consist of both common and preferred shares. 
• The limit to the carrying value of the assets of the ESBC and related corporations would be increased to $100 million. 

This initiative encourages reinvestment in Canadian businesses, potentially allowing for investments in areas such as upgrading machinery, purchasing new land, or expanding facilities. The goal is to give business owners more flexibility to grow their enterprises without the immediate tax burden on capital gains. 

These changes would be effective for qualifying dispositions on or after January 1, 2025.  

Reducing Credit Card Transaction Fees for Small Businesses 

The 2024 FES provides an update on the government’s efforts to reduce credit card transaction fees for small businesses: 

• New agreements with Visa and Mastercard have been finalized, reducing interchange rates for small businesses. 
• The new rates, effective October 19, 2024, will benefit over 90% of credit card-accepting businesses in Canada. 
• Small businesses can expect to see their interchange rates reduced by up to 27%. 
• These reductions will save small businesses approximately $1 billion over five years. 

However, some payment processors charge high flat fees that prevent small businesses from benefiting from these savings. To address this issue, the government is considering legislative measures to compel payment processors to pass on the savings to small businesses. 

Accelerating Digital Adoption for Small Businesses 

The 2024 FES proposes a significant investment to help small and medium-sized businesses embrace digital technologies: 

• Up to $500 million over four years, starting in 2025-26. 
• Funding is to be provided through the Business Development Bank of Canada (BDC). 
• Focus on financing and expertise for digital technology adoption, with a priority on AI. 

This initiative aims to boost competitiveness and productivity among Canadian small and medium-sized enterprises (SMEs) by facilitating their transition to more advanced digital tools and AI technologies. 

More Local Financing for Small Businesses 

2024 FES highlights the launch of the BDC Community Banking Initiative, aimed at enhancing access to financing for small businesses across Canada. This initiative will support up to 80 local lenders in providing greater financial resources to 100,000 small business owners over the next decade. It targets entrepreneurs with unconventional business models, those in rural or remote areas, individuals with limited credit history, and younger entrepreneurs. This effort addresses SMEs’ growing financing gap and encourages a more inclusive economic environment. 

Extending the Accelerated Investment Incentive 

The 2024 FES includes a proposal to fully reinstate the Accelerated Investment Incentive. Key points include: 

• Full reinstatement of the Accelerated Investment Incentive (AII) for qualifying property acquired on or after January 1, 2025 that becomes available for use before 2030. 
• It would be phased out starting in 2030 and fully eliminated for property that becomes available for use after 2033. 
• Eligible properties not normally subject to the half-year rule would qualify for an enhanced Capital Cost Allowance (CCA) equal to 1.5 times the standard first-year allowance if acquired on or after January 1, 2025, and becomes available for use before 2030. 

The full reinstatement of these measures will be followed by a four-year phase-out period between 2030 and 2033. 

Fully Reinstating the Immediate Expensing Measures 

Under this reinstated measure, specific types of clean energy generation and energy conservation equipment qualify for an enhanced first-year allowance that provides a 100% deduction for property acquired on or after January 1, 2025 and becomes available for use before 2030.  

The FES proposed the extension of immediate expensing for specific eligible properties, including: 

• Manufacturing or processing machinery and equipment (under Class 53). 
• Clean energy generation and energy conservation equipment (under Class 43.1 or 43.2 in some cases). 
• Zero-emission vehicles (under Class 54, 55, or 56). 

The full reinstatement of these measures will be followed by a four-year phase-out period between 2030 and 2033. 

Note: This information is current as of January 2, 2025. Please consult with qualified tax specialists and legal professionals for specific advice. 

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