Budget 2025 Overview: Government Funding and SR&ED Updates

Unveiled on November 4, 2025, Canada’s Federal Budget 2025 titled “Canada Strong” opens the door wide on investment, innovation, and competitiveness. With a clear shift toward supporting growth, streamlining tax incentives, and unlocking government funding for business transformation, this budget sends a strong message that if your business is planning capital, research and development (R&D), or export growth, now is the time.  

In this article, we unpack the most critical government funding program updates and major enhancements to the Scientific Research and Experimental Development (SR&ED) tax incentive program included in Canada’s Budget 2025, so your business can act with clarity. 

“Budget 2025 is an investment budget – a confident Canada taking control of its own future. Central to that mission is building local infrastructure, so we can empower Canadians with faster commutes, better careers, and lower costs. With a new investment of over $50 billion, we are building stronger communities to build Canada strong.” 
– Mark Carney, Prime Minister of Canada 

 

Government Funding Updates in Budget 2025 

The budget’s funding strategy centres on the consolidation of programs, trade resilience, and workforce readiness. Major programs include: 

• Strategic Response Fund (SRF): $5 billion over six years to merge and streamline innovation and resilience programs (including the Strategic Innovation Fund). This gives firms long-lead support for growth and supply-chain diversification.  
• CanExport SMEs support and SME Export Readiness Initiative: $68.5 million and $46.5 million respectively to help Canadian SMEs market abroad. 
• Industrial Research Assistance Program (IRAP): $39.9 million to scale international demonstrations of Canadian innovation. 

Workforce support: 

• $570 million for Labour Market Development Agreements (retraining in tariff-affected sectors). 
• $382.9 million for the Workforce Alliances and Innovation Fund. 
• $370.5 million for expanded employment insurance (EI) work-sharing flexibility plus $3.7 billion for temporary EI income support. 

Additional competitiveness funds: 

• Large Enterprise Tariff Loan (LETL) Facility Program: $10 billion to support firms impacted by global tariffs. 
• Regional Tariff Response Initiative (RTRI): $1 billion through Regional Development Agencies to help manufacturers retool and diversify. 
• Critical Minerals Sovereign Fund: $2 billion over five years to advance resource projects and strengthen domestic supply chains. 
• First and Last Mile Fund: $371.8 million for critical minerals logistics and production access. 
• Trade Diversification Corridor Fund: $5 billion to enhance transport infrastructure and export throughput. 

These programs reflect a holistic approach—not just capital and innovation, but also exports, supply chains, talent, and resilience. 

Funding Snapshot: Strategic Response Fund (SRF) 

Here’s a closer look at one of the biggest new government funding programs: 

• Objective: Consolidate existing innovation and resilience support programs and increase scale and sweep for firms facing trade, supply-chain, and export disruption. 
• Funding amount: $5 billion total over six years. 
• Eligible applicants: Canadian companies across sectors impacted by tariffs, supply-chain shifts, or global competition. 
• Eligible projects: Mergers of programs, strategic grants/loans, supply-chain diversification, and export expansion. 
• Timeline: Starts 2025–26; details and application process to follow. 

The SRF government funding program represents a central pillar of Budget 2025’s push to keep Canadian business globally competitive.  

Scientific Research and Experimental Development (SR&ED) Enhancements in Budget 2025 

The R&D tax incentive landscape is evolving significantly. Under the SR&ED program: 

• The enhanced 35% credit expenditure limit is raised from $3 million to $6 million for taxation years beginning on or after December 16, 2024. 
• Eligibility expands to include Canadian public corporations, creating new access for innovation-driven listed firms. 
• Capital expenditures are restored as eligible for SR&ED claims, a meaningful benefit for equipment-intensive R&D.
  Administrative reforms include: 
• Optional pre-claim approval process to secure up-front technical validation (cutting review times from 180 to 90 days). 
• AI-based triage to reduce audits for low-risk claims. 
• Streamlined documentation and fewer redundant information requests. 
• Effective date: Most improvements apply from April 1, 2026. 

For companies investing in innovation, keeping an eye on SR&ED timelines and eligibility criteria is critical. If your R&D footprint includes large-scale equipment, joint public-private projects, or upstream innovation pipelines, these changes open new opportunities for reinvestment. 

Note: Budget 2025 also confirms that the Canadian Entrepreneurs’ Incentive will not proceed, allowing resources to be reallocated toward SR&ED and capital-investment measures. 

Clean Technology and Critical Minerals Expansion 

To complement SR&ED and SRF funding, Budget 2025 expands several clean-economy incentives: 

• Critical Mineral Exploration Tax Credit (CMETC): Eligibility expanded to 12 new minerals: bismuth, cesium, chromium, fluorspar, manganese, molybdenum, niobium, tantalum, tin, tungsten, germanium, and indium. 
• Clean Technology Manufacturing Investment Tax Credit (CTMITC): Now includes antimony, indium, gallium, germanium, and scandium as qualifying minerals. 
• Clean Electricity ITC: The Canada Growth Fund is now an eligible entity, and its financing will not reduce the eligible cost base. 
• Carbon Capture, Utilization, and Storage (CCUS) ITC: Full credit rates extended to 2035 (from 2030). 

Together, these updates reinforce the government’s focus on industrial decarbonization and strategic resource independence. 

Integrating Funding and Tax Strategy 

With both major funding programs and SR&ED enhancements, success in this new environment requires integration of tax planning and funding strategy. Here are three focus points for your business: 

1. Align capital and innovation strategy 

If you’re planning manufacturing or processing buildings, advanced-equipment purchases, or R&D expansions, the interplay between funding programs (like the SRF) and SR&ED enhancements means you should weave tax and grant strategy together today. Where will you invest? Which incentives align? Which funding streams apply? 

2. Time your applications and expenditures 

With eligibility dates in SR&ED (tax years beginning December 16, 2024) and funding programs launching in 2025–26, timing will determine whether you qualify under the new rules. Start early. Collect documentation. Map your fiscal year. Lean on internal tax and funding resources. 

3. Address workforce and export dimensions 

If your strategy includes exports, supply-chain resilience, or workforce re-skilling, incorporate those angles in your funding plan and tax planning. The companies that seize the opportunity will view these programs as interconnected levers, rather than stand-alone items. 

Next-Steps Checklist 

• Review your upcoming projects and determine if they align with the $6 million enhanced SR&ED limit, public-corporate eligibility, or capital‐expenditure eligibility. 
• Map your business’s funding needs for 2025–26: Consider export initiatives, workforce retraining, and supply-chain diversification. 
• Create a matrix matching each project to relevant incentives (SRF, CanExport, IRAP, SR&ED). 
• Engage your tax advisory and funding teams now, so timelines, entitlement, and application work are front-loaded, not last-minute. 

Budget 2025 offers a rare alignment of generous tax incentives and purpose-built funding programs to help Canadian companies scale, innovate, and export with confidence. But opportunities like these don’t wait, early engagement and strategic planning are critical.  

Ready to explore how your business can benefit? Reach out to the Ryan Canada Government Funding team today to assess eligibility, map your strategy, and start your government funding applications.