What the Strategic Innovation Fund (SIF) can fund: eligible and ineligible costs
The Strategic Innovation Fund (SIF) is a federal Canada innovation funding program administered by Innovation, Science and Economic Development Canada (ISED). It supports large, transformative projects that strengthen industrial capacity, competitiveness, and innovation. This guide explains what expenses SIF can fund, how much funding is available, documentation standards, the reimbursement process, and how stacking with other programs works.
Note on terminology: Many ISED materials now reference the Strategic Response Fund (SRF), described as building on the former SIF. Cost eligibility rules, contribution types, and reporting concepts presented here reflect the current ISED framework and are commonly understood by applicants searching for SIF Canada information. Where helpful, SRF terms are mentioned for clarity.
Program Funding Overview
SIF is a project-based federal innovation fund that reimburses a share of eligible supported costs actually incurred and paid by recipients. Funding is delivered through contribution agreements, which can be repayable, non-repayable (in limited cases), or a combination. The program targets projects that:
Advance research and development (R&D), technology demonstration, and commercialization across Technology Readiness Levels (TRLs) 1–9.
Expand or materially improve industrial facilities and production capacity at TRLs 8–9.
Attract or anchor new mandates and investments in Canada, including full-time employment growth.
Build collaborative networks that accelerate technology development in priority sectors such as clean technology, critical minerals, biomanufacturing and life sciences, aerospace, digital industries, AI, automotive and batteries.
Projects are assessed on innovation, economic, and public benefits. The program emphasizes Canadian job creation, IP retention in Canada, greenhouse gas (GHG) reductions where applicable, and strong equity, diversity and inclusion (EDI) practices.
Funding Amounts & Rates
Minimum contribution: Typically $10 million for projects with at least $20 million in total eligible supported costs.
Funding model: Contributions are expressed as a sharing ratio, calculated as the total SIF/SRF contribution divided by the total eligible supported costs.
Case-by-case determination: The sharing ratio is set based on project activities, benefits, risks, sectoral priorities, and the total level of other government assistance.
Repayment conditions: By default, contributions are repayable. Terms can be:
Unconditional (interest-free with a fixed schedule),
Conditional (linked to verifiable metrics such as audited gross revenues),
A combination (some portions unconditional, others conditional).
Non-repayable contributions: Considered only for activities with significant public benefits and alignment to federal priorities, such as strong environmental outcomes, construction of anchor facilities, deepening Canadian supply chains, or major technology spillovers.
Collaborations and networks:
Operational activities (for example, salaries, travel, overhead, office equipment, professional services, redistribution of funds) may be covered for lead recipients when eligible.
Project activities (R&D, platforms and services) are typically cost-shared. For-profits generally receive partial coverage; not-for-profits or academic institutions may receive most or all of eligible supported costs for qualifying activities.
Other government assistance:
The combined level of assistance from all Canadian governments (federal, provincial/territorial, municipal) is considered when setting the contribution amount.
Industry participation is expected. Applicants should plan to demonstrate matching funds and private financing capacity.
Eligible Expenses
SIF reimburses a portion of eligible supported costs that are necessary for approved project activities and incurred during the project period defined in the contribution agreement. Typical SIF-eligible costs include:
Direct labour costs
Salaries and wages for employees directly performing eligible project work.
Employer-paid benefits proportionate to eligible labour.
Time must be tracked and attributable to eligible activities.
Direct materials and equipment costs
Materials consumed in R&D, prototyping, pilots or commissioning.
Equipment costs directly tied to project scope and necessary to perform eligible work.
Subcontracts and consultants
Third-party services providing specialized technical or professional expertise required to carry out project tasks.
Contracts must be arm’s length, competitively obtained where applicable, and aligned with procurement best practices.
Other direct costs
Items specifically and exclusively required for the project (for example, testing, certifications, specialized software seats used for eligible tasks, and logistics directly tied to eligible activities).
Overhead costs (program limits apply)
A capped proportion of indirect costs reasonably allocable to eligible activities, following program-specific guidance in the agreement.
Land and building costs
Eligible where necessary and reasonable for the project’s execution.
For collaborations and networks, land/building costs must benefit all network members.
Additional conditions may apply; expect rigorous justification requirements.
Additional eligible costs for collaborations and networks:
Network operations and coordination
Organization of networking events.
Operation of regional offices across Canada.
Participation in collaborative R&D and technology activities.
Conferences and workshops supporting collaborative R&D.
Network administration and services
Travel, salaries, overhead, office equipment, professional services, and other appropriate operational costs.
Scope guidance by activity type:
R&D and commercialization (TRLs 1–9): Eligible costs support ideation, applied research, development, prototyping, validation, and steps toward market deployment.
Firm expansion and growth (TRLs 8–9): Eligible costs support capacity scale-up, process improvements, and production readiness for proven technologies.
Investment attraction and reinvestment (minimum TRL 2): Eligible costs support establishing new Canadian facilities, new mandates, and associated staffing.
Ineligible Expenses
SIF will not reimburse certain costs even when incurred during the project. Typical ineligible costs include:
Advertising, other than reasonable industry/institutional notices in trade, technical or professional journals.
Interest on invested capital, bond discounts, finance charges, and similar costs.
Amortization of unrealized appreciation of assets.
Unreasonable compensation for officers and employees.
Depreciation of assets.
Donations.
Dues and memberships other than regular trade and professional associations.
Entertainment expenses.
Fines and penalties.
Losses on investments, bad debts, or collection costs.
Losses on other projects or contracts.
Premiums for life insurance on officers and/or directors.
Product development or improvement expenses not associated with the approved project.
Provisions for contingencies.
Selling and marketing expenses associated with products or services developed in the project.
Taxes, including excess profit taxes, federal or provincial income taxes, and goods and services taxes, plus special expenses related to those taxes.
Applicants should segregate ineligible costs in their systems and exclude them from claims to minimize rework and audit adjustments.
Expense Documentation Requirements
SIF is a claim-based program. To demonstrate that costs are eligible, incurred, and paid:
Maintain detailed source documents:
Invoices, purchase orders, contracts, and proof of payment for materials, equipment, and services.
Payroll registers, employment agreements, timesheets, and cost allocation records for direct labour.
Travel claims with itineraries, receipts, and business purpose tied to eligible activities (for networks and where applicable).
Track costs by work package:
Align your chart of accounts and cost centres to the statement of work and milestones in the contribution agreement.
Separate eligible and ineligible items at the outset.
Support allocation methods:
Document the methodology for any overhead or shared cost allocations.
Keep consistent, reasonable bases and apply them only within program limits.
Ensure audit readiness:
Keep organized, verifiable records for the entire project life and for the period specified in the agreement after completion.
Prepare for possible site visits and desk reviews.
Report regularly:
Submit claims on the agreed schedule (often quarterly).
Provide project status, benefit updates, cash flow forecasts, and any required plans (for example, IP, supply chain continuity, sustainability, EDI) as specified.
Examples of Funded Projects
These illustrative examples show how eligible costs fit typical SIF project types:
Clean technology scale-up (TRL 8–9)
Scenario: A manufacturer in British Columbia expands a pilot line into full-scale production of a low-carbon product.
Eligible costs may include: plant equipment directly tied to the expansion, process integration engineering, direct labour for installation and commissioning, subcontracts for control systems, and capped overhead.
Non-repayable consideration: Certain environmental anchor activities may be considered for non-repayable treatment if they deliver significant public benefits; most expansion costs are typically repayable.
Critical minerals demonstration (TRL 6–7)
Scenario: An Ontario processor demonstrates a new refining process with industry and academic partners.
Eligible costs may include: pilot equipment and materials, testing, analytics, specialized subcontractors, network workshop costs if part of a collaboration, and direct labour for R&D tasks.
Biomanufacturing platform R&D (TRL 3–6) under a network
Scenario: A national network coordinates multi-site projects to develop next-generation bioprocessing technologies.
Eligible costs may include: network operations (events, regional offices, travel, salaries), collaborative R&D subprojects, equipment and consumables, professional services, and appropriate overhead.
Aerospace digital twin for production efficiency (TRL 7–8)
Scenario: A Quebec aerospace firm implements a digital twin to reduce scrap and energy intensity.
Eligible costs may include: software licenses used directly in eligible work, integration services, testing, direct labour, and consultants. Marketing or broad corporate IT upgrades would not be eligible unless directly and solely tied to the project scope.
AI-enabled advanced manufacturing R&D (TRL 4–6)
Scenario: A Prairie-region consortium trains and validates AI models to improve defect detection on production lines.
Eligible costs may include: data collection infrastructure used for the project, model development labour, compute resources dedicated to the R&D tasks, subcontracted specialists, and network workshops.
In all cases, align expenses to the approved statement of work, justify necessity and reasonableness, and separate non-project activities.
Funding Disbursement & Claiming Process
Contribution agreement first: No claims are paid before the agreement is executed.
Claim-based reimbursement: Recipients submit periodic claims for eligible costs that have been incurred and paid, often quarterly.
Reporting cadence: Claims usually include activity progress, benefits and risk updates, and updated project cash flow.
Monitoring and audits: ISED may conduct reviews or audits to verify costs, benefits, compliance with program conditions, and, for repayable contributions, royalty or repayment reporting.
Repayments:
Unconditional: Fixed, interest-free schedules after a grace period.
Conditional: Based on verifiable metrics (for example, future revenue), with totals determined as conditions occur.
Combined structures: Some project components may be unconditional; others conditional.
Plan cash flow to bridge the timing between incurring costs and receiving reimbursements. Ensure your treasury and financing partners understand the claim schedule.
Stacking Rules
Total government assistance:
SIF considers all Canadian government support for the same costs, including federal, provincial/territorial, and municipal programs.
The combined assistance affects the final contribution amount and sharing ratio.
Industry participation:
Applicants are expected to contribute matching funds and demonstrate financial capacity.
Program compatibility:
Recipients must disclose other assistance, including tax credits and wage subsidies, and avoid double-counting the same cost item.
If combining with programs such as provincial clean tech funds or research grants, align cost attribution and timelines in your budget model.
Internal controls:
Maintain a funding ledger to track which portion of each cost is attributed to SIF versus other assistance.
Real-World Budgeting Tips
Start with eligibility mapping:
Classify every budget line as eligible, ineligible, or potentially eligible with conditions. Attach the rationale and supporting documents.
Right-size the scope:
Build the budget around the approved statement of work and TRLs; exclude general modernization or corporate initiatives not essential to the project.
Separate capital from operating items:
Ensure equipment and land/building costs are necessary and reasonable. For networks, show how facilities benefit all members.
Cap overhead early:
Apply program limits to overhead and keep a clear allocation methodology ready for audit.
Evidence of matching funds:
Prepare term sheets or internal approvals to demonstrate your ability to finance the non-SIF share and manage cash flow until reimbursements.
Procurement discipline:
Use competitive processes and document sole-source justifications where applicable for subcontracts and consultants.
Track benefits and EDI:
Quantify Canadian jobs, GHG impacts, IP strategy, and supply chain outcomes. These can influence contribution structure and terms.
Plan for repayments:
Model unconditional schedules and conditional repayment scenarios. Understand the impact on future cash flows and covenants.
Keep SR&ED and other incentives in view:
If you intend to claim tax credits, segregate costs and ensure no double-claiming. Disclose all stacking in SIF submissions.
Prepare for due diligence:
Maintain a dossier with technical feasibility, risk management, market validation, and environmental considerations tied directly to cost lines.
Conclusion
The Strategic Innovation Fund funds a wide range of project costs that drive Canadian industrial innovation, from direct labour and materials to specialized subcontracting, capped overhead, and, in specific cases, land and buildings. Contribution amounts are set case-by-case, with repayable terms by default and non-repayable funding reserved for activities delivering significant public benefits aligned with federal priorities. By mapping budgets to eligible activities, documenting every cost, planning for claims and repayments, and coordinating other government assistance, organizations can maximize SIF funding coverage while staying fully compliant with ISED requirements. For readers encountering Strategic Response Fund terminology, the cost rules and contribution concepts described here reflect the current framework used across large Canadian innovation projects.
