The federal government's newly announced Productivity Mega Deduction will let businesses immediately write off 100% of the cost of eligible aircraft acquired on or after Sept. 15, among a broader expansion of assets qualifying for full first-year expensing.
Prime Minister Mark Carney announced the measure at Canada's inaugural Investment Summit in Toronto, building on the Productivity Super-Deduction introduced in Budget 2025.
Where that earlier measure covered roughly 15% of business capital assets, the Mega Deduction expands eligibility to more than 65%, adding aircraft, fibre-optic cable, mining property, oil and gas pipelines, software, rail infrastructure and other capital-intensive asset classes. The government projects the change will cut Canada's marginal effective tax rate on new business investment to 6.4%, from 13% currently, the lowest among G7 economies.
For aircraft specifically, the deduction requires the plane to be ready to fly for business use; if it's still being completed or refurbished at year-end, the write-off rolls into the year it actually becomes usable, according to the Canadian Business Aviation Association. Pre-owned aircraft qualify too, subject to rules restricting purchases from a seller who previously owned the aircraft or from a non-arm's-length party.
"This is a significant advocacy win for CBAA and our members," said CBAA president and CEO Harlan Simpkins, adding that the association is monitoring implementation as the measure still requires legislative approval. CBAA represents what it describes as Canada's $17.9 billion business aviation industry.
A tax incentive that makes buying a business aircraft, new or used, meaningfully cheaper on an after-tax basis is a direct driver of exactly the kind of transaction volume that shapes aviation insurance demand: more aircraft changing hands means more hull and liability policies being written, rewritten or transferred.
Every registered aircraft in Canada must carry liability insurance under Canadian Aviation Regulations Section 606.02, and hull coverage, while not always legally mandatory, is standard practice given how expensive an aircraft loss can be; annual insurance and operating costs alone can range from roughly $700,000 for a turboprop to as much as $4 million for a large jet.
If this deduction meaningfully accelerates aircraft acquisitions, as it's specifically designed to do, brokers in the business aviation space should expect a genuine uptick in new policy placements and coverage reviews tied to ownership transfers over the coming year.
This incentive arrives while aviation insurance capacity remains ample. Insurance Business reported earlier this year on WTW's finding that airline insurers attempting to push through hull and liability rate increases in 2024 were met with excess capacity, leading to rate declines instead, a soft-market dynamic expected to persist absent a major loss event or a reduction in available capacity.
That combination, cheaper aircraft acquisition costs from the tax change and continued buyer-friendly insurance pricing, could compound to make this a genuinely attractive moment for Canadian businesses to add aircraft, and a moment worth flagging proactively to existing aviation clients weighing a purchase decision.
The deduction's pre-owned aircraft provision, with its non-arm's-length ownership restrictions, is worth pairing with standard insurance diligence on used aircraft purchases. Maintenance history, prior claims, and airworthiness records all factor directly into how a pre-owned aircraft gets underwritten and priced for hull coverage, independent of whether the buyer qualifies for the tax deduction itself.
Brokers advising clients on a pre-owned purchase timed to capture this tax benefit should treat the insurance underwriting review as a parallel, not secondary, part of the transaction, since a hull policy that comes back with unfavourable terms or exclusions could offset some of the tax advantage the client is trying to capture.
