Earlier this year, in our What to Expect for 2026 in the Aviation Sector in Canada bulletin, we noted that 2026 would likely become a defining year for tax planning in the Canadian business aviation sector. Recent developments appear to confirm that prediction. On September 15, 2026, the federal government announced the proposed Productivity Mega Deduction, which would permit businesses to immediately deduct 100% of the cost of eligible new investments in a substantially broader range of asset classes, including aircraft, acquired on or after that date rather than claiming depreciation over several years under the ordinary capital cost allowance (the “CCA”) regime, subject to certain conditions[1]. The measure represents a significant shift in the tax treatment of aircraft acquisitions and underscores the importance of integrating tax considerations into ownership, financing, and operating structures.
Key Requirements
To qualify, the aircraft must be acquired on or after September 15, 2026. Also, the aircraft must be available for use before the deduction can be claimed. Generally, this means the aircraft must be ready to fly and capable of being used in the business. Where an aircraft remains subject to completion, refurbishment, modification, or other work at year-end, the deduction will generally be deferred until the taxation year in which the aircraft becomes available for use.
Certain used aircraft may also qualify for the deduction, subject to specific restrictions. In particular, the aircraft generally must not:
- have previously been owned by the taxpayer;
- have previously been owned by a non-arm’s-length person; or
- have been acquired through certain tax-deferred transfer transactions.
Potential Benefits
The proposed measure would accelerate the timing of tax deductions associated with aircraft acquisitions by allowing taxpayers to deduct the full purchase price in the year the aircraft becomes available for use.
Compared with the existing CCA regime, an immediate write-off may improve after-tax cash flow, reduce the cost of capital associated with aircraft acquisitions, increase the attractiveness of investing in business aviation assets and create planning opportunities for taxpayers expecting significant taxable income.
However, because the timing of the deduction depends on when the aircraft becomes available for use, businesses contemplating aircraft acquisitions should pay particular attention to delivery schedules and completion timelines, building reasonable assumptions and safeguards to ensure that the aircraft will truly be available for use in the year the deduction is wanted.
Looking Ahead
The Productivity Mega Deduction remains subject to legislative implementation and additional guidance from the federal government. Businesses considering aircraft acquisitions should carefully assess their eligibility and determine how the proposed measure may affect transaction timing and tax planning strategies.
Fasken’s national aviation team provides a wide range of legal services to Canadian and international companies operating in the aviation industry. Our lawyers have a deep understanding and proven track record in handling aviation regulatory, litigation, and complex transactional matters. We are eager to assist you efficiently and effectively.
