Selling in Five Years? Don’t Let Your Business Retire Before You Do.

September 24, 2026

Canada’s proposed Productivity Mega Deduction is a reason to revisit your investment plan—not a reason to buy equipment you don’t need.

The equipment needs replacing. The software requires three workarounds and a very patient bookkeeper. But retirement is five years away, so the plan is to make everything last.

It is an understandable calculation. Why put more money into a business you are preparing to leave?

Consider the same situation from the other side of the negotiating table. Your buyer is preparing to take over a business, and that collection of deferred decisions could look like a substantial bill waiting to arrive. Maintaining equipment and continuing to improve operations are important parts of preparing a business for sale. 

Canada’s proposed Productivity Mega Deduction makes this a timely conversation. But the question goes beyond tax:

Are you investing for the business’s next owner—or simply keeping things running until your own retirement date?

What Ottawa is Proposing

On September 15, 2026, the federal government proposed the Productivity Mega Deduction, which would permanently expand immediate expensing to a much broader range of depreciable business assets. Eligible investments generally acquired on or after that date could be fully deducted for tax purposes in the year they become available for use. Finance Canada estimates that approximately two-thirds of capital investment could qualify. 

This remains a proposal, not an enacted measure. Important exclusions include buildings in specified capital cost allowance classes, goodwill, franchises, certain licences and certain vehicles. Eligibility depends on the actual property and the applicable rules—not simply whether the purchase is described as an “investment.” 

Some equipment and technology already qualify for immediate expensing under existing measures. The proposal’s significance is its broader coverage and intended permanence, rather than an entirely new benefit for every purchase. 

A Deduction is Not a Business Case

The attraction of immediate expensing is principally timing: an eligible deduction becomes available sooner instead of being spread over future years. That can improve the economics of a worthwhile investment. It does not make the equipment free. 

For illustration, a usable $100,000 deduction at an assumed applicable tax rate of 25% would reduce tax by $25,000—not $100,000. Nor would that necessarily represent $25,000 of additional savings compared with existing rules, because deductions might otherwise have been available over time.

Our advice is to begin with the operating problem, not the tax treatment.

Will the investment reduce costly interruptions? Eliminate unnecessary work? Improve capacity that customers will actually use? Make the business less dependent on the owner?

A favourable deduction can strengthen a sound decision. It should not be asked to rescue a poor one.

Invest in Results a Buyer Can See

For an owner several years from selling, the most useful investments are those with a clear connection to profitability, reliability or the ability to transfer operations to someone else. Improving processes and developing a business that can function without its owner are established sale-preparation priorities. 

Consider an equipment upgrade intended to reduce rework and overtime.

The eventual sale argument should not be, “We spent $150,000.”

It should be, “Here are two years of results showing fewer defects, lower overtime and better margins.”

That is the distinction we would encourage owners to focus on: the purchase is an input; the demonstrated improvement is the business case.

The same discipline applies to technology. A new system may be useful, but it needs to be implemented, adopted by employees and supported by workable processes. Buying software shortly before a sale is not the same as handing over an operation that already runs better because of it.

A three-to-five-year planning window gives you room to test decisions, correct mistakes, and build evidence. Use that time to make improvements a buyer can understand, rather than relying on promises about what a recent purchase might eventually deliver.

Keep the Tax Return Separate From the Valuation

There is an important distinction here: a larger tax deduction does not automatically mean higher operating earnings.

Capital cost allowance is a tax deduction that replaces accounting depreciation for income-tax purposes. Accelerating that deduction does not, by itself, improve EBITDA—earnings before interest, taxes, depreciation and amortization. 

For valuation purposes, our approach is to separate three things: the operating improvement, the capital investment required to achieve it, and the timing of the tax benefit.

A genuine, sustainable reduction in operating costs may support stronger earnings. An accelerated tax deduction affects after-tax cash flow. Those are different benefits and should not be counted twice.

Likewise, a capital purchase should not become an extra EBITDA “add-back” merely because it qualified for immediate tax expensing. The accounting treatment and the actual cash requirements still need to be understood.

The objective is to demonstrate a stronger business—not simply a smaller taxable-income figure.

Five Years Before a Sale is Different From Five Months

Our recommendation becomes more cautious as the transaction approaches.

A buyer may have different equipment preferences, existing technology or plans to combine your operations with another business. Before making a significant purchase near closing, discuss who should make the investment and how it will be reflected in the transaction. Do not assume a buyer will reimburse the expenditure dollar for dollar.

There is also a tax consideration that deserves attention: selling depreciable assets can trigger recapture, bringing previously claimed capital cost allowance back into taxable income. An accelerated deduction should therefore be assessed alongside the expected sale structure, timing and after-tax proceeds—not in isolation. 

Your accountant and transaction advisor should have that conversation before you commit to a major pre-sale purchase.

Plan the Investment and the Exit Together

The sensible response to this proposal is neither a spending spree nor an automatic spending freeze.

Start with the business you expect to sell. Identify the weaknesses a buyer is likely to question. Then assess which investments could improve sustainable cash flow, reduce operating risk, or make the company easier for someone else to run.

At EVCOR, we help owners assess business value, identify opportunities for improvement, and prepare for an eventual sale. Connecting those decisions early is the purpose of exit planning. 

Your retirement may be approaching. Your business should still have a future worth buying.

Planning a sale in the next few years? Speak with EVCOR about a valuation and exit plan before deciding which investments to make—or postpone.

This article discusses federal proposals available as of September 21, 2026. It provides general information, not individual tax advice. Confirm the measure’s legislative status, eligibility and implications with your tax advisor before acting.