Prime Minister Mark Carney has announced the cancellation of a controversial planned increase to the capital gains inclusion rate, a proposal that was initially set out in the 2024 federal budget.
The government’s decision reflects a shift in policy priorities, aiming to support Canada’s builders, small businesses, and entrepreneurs by reducing tax burdens that critics argued would have stifled investment and innovation.
The proposal, which was originally due to take effect on June 25, 2024, would have required individuals and businesses with more than $250,000 in capital gains to pay higher taxes on those proceeds. The move, expected to generate approximately $19.4 billion in revenue over five years, had drawn significant opposition from various business and tech leaders. It was deferred to January 1, 2026.
Prime Minister Carney’s office released a statement confirming the government’s decision to abandon the tax hike, noting that the cancellation will foster a more investment-friendly environment in Canada.
"Canada is a country of builders," said Carney. "Cancelling the hike in capital gains tax will catalyze investment across our communities and incentivize builders, innovators, and entrepreneurs to grow their businesses in Canada, creating more higher-paying jobs."
In addition to this cancellation, Carney’s government will uphold plans to increase the Lifetime Capital Gains Exemption (LCGE) limit to $1.25 million for the sale of shares in small businesses, as well as farming and fishing property. This increase, up from the previous $1 million, will incentivize more investment in these sectors and provide greater financial flexibility for business owners.
Legislation to formalize this increase will be introduced at a later date, following the upcoming federal election.