Federal Government Defers Capital Gains Inclusion Rate Hike Until 2026

Ottawa, Canada – The federal government has announced a deferral in the implementation of a planned increase to the capital gains inclusion rate, pushing it from June 25, 2024, to January 1, 2026. Finance Minister Dominic LeBlanc made the announcement on Friday, stating that the delay aims to provide certainty for Canadians, particularly as tax season approaches.

LeBlanc also revealed that the government intends to introduce new exemptions alongside the changes to prevent middle-class Canadians from facing higher taxes should the policy become official. He assured that forthcoming legislation would include an increase to the lifetime gains exemption and a new incentive for entrepreneurs.

“The deferral of the increase to the capital gains inclusion rate will provide certainty to Canadians, whether they be individuals or business owners, as we quickly approach tax season,” LeBlanc stated. “Given the current context, our government felt that it was the responsible thing to do.”

The proposed hike, initially introduced in the Liberals’ latest federal budget, aims to raise the taxable portion of capital gains for corporations from one-half to two-thirds. For individuals, the policy would apply to capital gains earnings exceeding $250,000. However, despite being tabled as a ways and means motion, the changes have yet to pass through Parliament, which is currently prorogued until March 24.

Despite the legislative delay, the Canada Revenue Agency (CRA) had already begun preparations to administer the changes. Parliamentary convention dictates that taxation proposals take effect as soon as the government tables a notice of ways and means motion, prompting early adjustments by the tax agency.

With the deferral in place, businesses and investors will have more time to prepare for the potential tax changes, while the government works to finalize exemptions and incentives aimed at mitigating the impact on middle-class Canadians and entrepreneurs.