A Provincial Strategy Riding a Federal Wave
On May 28, 2026, at the CANSEC trade show in Ottawa, the Government of Ontario unveiled the framework for its first-ever Defence Industrial Strategy (ODIS). It's a ten-year plan built around the province's recognized strengths — R&D, critical minerals, nuclear energy, aerospace, advanced manufacturing, and a skilled workforce — aimed at capturing a growing share of Canadian and allied defence spending. Ontario already counts more than 300 defence and dual-use firms employing over 13,000 workers and generating roughly $5 billion in annual revenue, a base ODIS is designed to help scale.
The timing isn't a coincidence. In February 2026, the federal government launched its own Defence Industrial Strategy, backed by $6.6 billion over five years, part of the $81.8 billion envelope announced in Budget 2025. That federal strategy deliberately left room for provinces to build their own layer on top — Ontario was the first to do so this formally.
ODIS is still a framework, not a funded program. Specific instruments (grants, calls for proposals) will be announced as consultations move forward through the rest of 2026. But the targets give a sense of scale: 43,000 jobs created, $6 billion added to the provincial economy, and over $400 million in annual tax revenue, by 2035.
What ODIS Actually Prioritizes
The framework centres on four themes that show up in almost every defence industrial strategy in the country:
- Strengthening existing manufacturers so they can meet the quality and traceability standards defence work requires
- Betting on frontier technology — AI, autonomous systems, quantum, aerospace — rather than traditional military hardware
- Expanding access to allied markets, notably through Canada's participation in the EU's SAFE initiative
- Building an integrated supply chain anchored in critical minerals and advanced manufacturing
The emphasis on dual-use technology matters here: a company building AI, sensors, or autonomous systems can be relevant without ever having held a defence contract, which is exactly the audience ODIS is trying to widen.
The Real Financial Lever Is Still SR&ED
ODIS sends a strategic signal, but the money available today comes from stacking the R&D credits that already exist — and that's where the opportunity is most concrete.
- The enhanced federal SR&ED credit offers 35% refundable on the first $6 million in qualifying expenditures for CCPCs, a limit doubled following Bill C-15's royal assent in March 2026. Capital expenditures are once again eligible too.
- In Ontario, that federal credit stacks with the Ontario Innovation Tax Credit (8% refundable, up to $3M) and the Ontario Research and Development Tax Credit (3.5% non-refundable) — up to 43% combined recovery on eligible spending.
- Companies partnering with an Ontario research institute can add the Ontario Business-Research Institute Tax Credit (20%).
- Federal programs like the Regional Defence Investment Initiative (RDII) and DI Assist (housed within NRC IRAP) fund prospective activities — prototyping, supply chain integration — that complement SR&ED, which reimburses R&D already done.
- BDC's Defence Platform adds up to $4 billion in financing, advisory services, and venture capital for businesses scaling in the sector.
For a company already spending $2 million a year on qualifying R&D, stacking federal and provincial credits is the difference between a five-figure and a six-figure refund.
What About Businesses Outside Ontario?
The federal SR&ED credit applies across Canada, ODIS or not. Quebec already has its own equivalent to Ontario's initiative: $64.9 million over three years, announced in February 2026 to help Quebec SMEs integrate into defence supply chains. Quebec companies building dual-use AI technology can also stack CDAE-IA on top of their SR&ED claim.
In other words, regardless of province, the real question isn't just whether ODIS applies to you — it's whether you're already claiming everything your R&D spending entitles you to.
The Bottom Line
ODIS is a signal, not yet a program. The SR&ED-plus-provincial-credits-plus-federal-initiatives stack, on the other hand, is already in place and underused by a lot of R&D-driven businesses. The smartest move in 2026 is to watch how ODIS develops while making sure every dollar of SR&ED you're already entitled to gets claimed.