Prime Minister Mark Carney reportedly announced the cancellation of a proposed increase in the capital gains tax initially introduced by former Prime Minister Justin Trudeau’s administration.
This decision aims to support small businesses and stimulate private investment across Canada, facilitating job creation.
In his statement, Carney emphasized that halting the tax hike would encourage investment in communities and incentivize entrepreneurs and builders to expand their operations.
The government confirmed that it would still proceed with raising the lifetime capital gains exemption limit to $1.25 million, applicable to the sale of small business shares and farming or fishing properties. Legislation to formalize this change will be introduced soon.
The planned increase to the taxable amount of capital gains was first outlined in the federal budget of 2024 and was intended to take effect after being deferred until January 2026.
Currently, only half of capital gains are taxable, with these amounts added to personal income and taxed at the individual’s marginal tax rate.
The now-canceled changes would have resulted in individuals with annual gains exceeding $250,000 facing two-thirds of those gains being taxed.
Opposition to the tax hike had been widespread; various groups, including the Conservative party, healthcare professionals, and agricultural associations, expressed concerns that the increase would negatively impact small businesses, healthcare recruitment, and retirement savings.
The Canadian Federation of Independent Business reported that 72% of its members opposed the increase, citing potential harm to investment.
The cancellation follows a broader debate over capital gains tax legislation, which was set aside when Parliament was prorogued, requiring any changes to be reintroduced in future sessions.
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