Farm businesses have spent much of the past year in “plan, but hold” mode. With Budget 2025 finally released, we finally get some long-awaited clarity on what the new government plans to do. Parts of the 2024 federal budget were never passed into law, which created a lot of uncertainty around key tax changes. That uncertainty caused many producers to delay reorganizations, equipment purchases, or intergenerational transition plans.
Budget 2025 clears the air in a few important areas and introduces some new tax and policy measures aimed at investment and innovation. Here’s our take on what matters most for Canadian agriculture.
Productivity Super-Deduction
The 2025 federal budget introduced a Productivity Super-Deduction. This is a temporary 100 percent deduction for certain new capital investments made between April 16, 2025 and January 1, 2028. However, this measure is aimed mostly at manufacturing, processing, and renewable-energy assets rather than typical farm machinery or buildings.
For most producers, these changes won’t apply, but it’s still encouraging to see the government focusing on productivity and capital investment which are both critical for the long-term competitiveness of Canadian agriculture.
SR&ED: Bigger Limits and a More Predictable Process
Two updates stand out here. Budget 2025 doubles the expenditure limit for the enhanced 35 percent Scientific Research and Experimental Development (SR&ED) credit to $6 million and directs CRA to create an elective pre-claim approval process that could cut processing time significantly.
Where farms might benefit: if you’re genuinely developing new equipment, control systems, or production processes that involve testing and technical uncertainty, SR&ED might apply. The pre-claim process should also reduce the “will this qualify?” uncertainty that’s kept some producers from making a claim in the past.
Agriculture-Specific Measures
Agricultural cooperatives and patronage shares. The existing deferral for income tax and withholding on eligible patronage shares is proposed to be extended to shares issued up to the end of 2030. If your farm deals with a co-op that pays part of its dividend in shares, this extension matters for timing and cash-tax planning.
Market access and CFIA digital tools. Funding is being provided to the Canadian Food Inspection Agency (CFIA) to modernize trade certificates, digitize export processes, and expand market-access efforts. It may not affect your tax bill, but smoother certificates and fewer paper delays can make a difference for farms and processors shipping product abroad.
Grain supply chain work. The budget acknowledges long-standing rail-to-port logistics challenges and commits to ongoing work on forecasting and capacity. This is a good sign that supply-chain reliability remains on Ottawa’s radar.
A Note on the Lifetime Capital Gains Exemption
Budget 2025 confirms the government’s intention to maintain the 2024 proposal to increase the Lifetime Capital Gains Exemption (LCGE) for qualified farm property, fishing property, and small-business shares to $1.25 million.
This higher limit was first announced in the 2024 Budget, but that budget was never passed into law due to the prorogation of Parliament. As a result, the change never took effect. The 2025 Budget reaffirms the government’s commitment to move ahead with it but new legislation will still be required before it becomes law.
While that step is still pending, the intent is clear. Once enacted, the higher limit will be a meaningful benefit for farmers planning family transitions, share sales, or intergenerational transfers.
Capital Gains Rules Hold Steady
One of the most closely watched tax items last year was the proposed increase to the capital gains inclusion rate. The 2024 Budget had suggested raising it from 50 percent to 66⅔ percent for corporations and trusts, and for individuals on annual gains over $250,000. That proposal was never passed into law.
The 2025 Budget doesn’t revisit or reintroduce that change, confirming that the measure has been dropped entirely, as the Carney government announced earlier this year. The inclusion rate remains at 50 percent, and there’s no indication of any plan to review or adjust it in the near future.
For farm corporations and family operations that delayed land or asset sales while waiting for clarity, this decision provides some breathing room. Still, given how often tax policy shifts in this area, it’s worth reviewing capital-gains strategies regularly.
Final Thoughts
For agriculture, Budget 2025 brings more stability than surprise. Most of the leftover uncertainty from 2024 has been resolved, and while not every measure applies directly to farms, the emphasis on productivity, innovation, and succession planning is positive for the sector overall.
You can read the full details directly on the Government of Canada’s website at https://budget.canada.ca/2025/home-accueil-en.html
If you’d like to talk about how any of these updates may affect your operation, reach out to Matt or Mary through our Contact Page or give us a call at 204-542-0437.