RMR Rosenswig McRae Rosso LLP

November 6, 2026

2026 Federal Budget

The 2026 Federal Budget includes several notable tax measures for private business owners, investors, and high-net-worth Canadians. The budget focuses on encouraging investment, supporting entrepreneurship, and simplifying tax compliance, with proposals aimed at reducing administrative burdens and creating new incentives for business growth.

Personal Tax Measures

Canada Growth Incentive (CGI)

Budget 2026 proposes a new Canada Growth Incentive (CGI), which would provide a capital gains exemption of up to $15 million on qualifying investments in eligible Canadian businesses.  For ambitious entrepreneurs and investors with plans to achieve significant capital gains this provides a vastly enhanced incentive compared to the existing program which provides an exemption for the first $1,275,000.

Importantly this new plan only applies for shares issued after the budget date.  Entrepreneurs and investors will want to carefully consider how to structure any future advances to an existing business in order to maximize the opportunity for the CGI.

The exemption would be available to Canadian-resident individuals who acquire qualifying shares after age 18 and hold them for at least 36 months. This exemption is available per business so that there is no limit to the number of times an individual can claim the exemption. When the shares are issued, the corporation must be a Canadian-controlled private corporation, carry on an active business primarily in Canada, and have less than $100 million in assets.

Not all industries would qualify. Excluded businesses generally include professional practices—such as law, medicine, architecture, accounting, and engineering—as well as businesses in the agricultural, insurance, and real estate sectors.

The corporation would also need to satisfy certain conditions throughout the ownership period and at the time of sale. At disposition, it must be a Canadian-resident corporation that is either privately held or publicly listed on a designated Canadian stock exchange. In addition, substantially all of the fair market value of its assets must be attributable to assets used principally in a qualifying business.

Although the CGI would provide a capital gains exemption of up to $15 million, Alternative Minimum Tax (AMT) may still apply. This could result in a personal tax liability of approximately 9%, (assuming the Ontario government follows the federal government) even if the gain otherwise qualifies for the exemption.

Enhanced Rollover for Investments in Small Businesses

An individual selling shares of an eligible small business corporation currently is able to defer capital gains by acquiring replacement shares in the year of sale or the following year. The budget proposal would extend the reinvestment period to up to three calendar years and, in certain situations, up to five years.

Tax Instalments

The proposal would increase the threshold for tax payors requiring instalments to $7,500 from $3,000. Self-employed individuals and commission earners would also be permitted to make one annual instalment payment instead of quarterly payments.

Personal Tax Filing Deadline

Currently individuals must file their tax returns and pay any taxes owing by April 30. Self-employed individuals have until June 15 to file but must still pay by April 30.

The proposal would establish a common filing and payment deadline of May 15 for all individuals, beginning with the 2027 personal tax year.

T1135 Foreign Asset Reporting

Canadians who own foreign investments with a total cost exceeding $100,000 are currently required to file Form T1135, Foreign Income Verification Statement.

The proposal would increase the filing threshold to $200,000 and raise the threshold for simplified reporting from $250,000 to $500,000.

Other Personal Tax Changes

Budget 2026 also proposes several measures intended to simplify compliance, including:

• Optional flat amount claims designed to reduce recordkeeping for moving expenses ($1,000), the home accessibility credit ($1,000), and adoption expenses ($1,200);

• Simplified medical expense documentation requirements for numerous medical devices and prescriptions; and

• RRSP modernization: The government has launched a consultation on a proposed “RRSP for Life” framework that would eliminate mandatory RRSP-to-RRIF conversion at age 71 while retaining minimum withdrawal requirements after age 71.

Objections to CRA Assessments

Most taxpayers have only 90 days to object to an assessment and often need to request an extension.

Under the proposal, most taxpayers would have until the later of one year from the assessment date or two years from the return filing deadline to file an objection.

Expansion of Intergenerational Farm and Fishing Transfers

The rollover was generally available only for transfers of qualifying farm or fishing property to children, grandchildren, or great-grandchildren.

The proposal would extend the rollover to transfers to nieces, nephews, grandnieces, and grandnephews.

Corporate Tax Measures

Scientific Research and Experimental Development (SR&ED)

The SR&ED program currently provides a refundable tax credit of up to 35% for qualifying Canadian-controlled private corporations and a 15% credit for many other businesses.

For tax years beginning on or after November 5, 2026, Budget 2026 proposes to expand the SR&ED program to include certain commercialization costs, regulatory approval activities, and intellectual property protection costs.  This will have the impact of increasing the amount available for credits.

Interest Deductibility Rules

Budget 2026 proposes targeted amendments to the excessive interest and financing expense limitation (EIFEL) rules. The amendments would broaden several existing exemptions and provide more flexibility for corporate groups operating through multiple corporations, trusts, and partnerships.

The proposals could make it easier for corporate groups to deduct legitimate financing costs and provide greater flexibility in structuring investments and business operations.

Corporate Tax Elections

Many corporate tax elections currently require supporting resolutions and authorizations to be filed with the CRA. For example, a capital dividend election requires a certified resolution.

Budget 2026 proposes to remove the requirement to file certain corporate resolutions and authorizations with tax elections. The measure would apply to elections and agreements made on or after the date the legislation receives royal assent.

Corporate Loss Transfer Consultation

Canada generally does not permit losses to move freely within a corporate group, often requiring complex planning to use them. Budget 2026 launches consultations on a formal loss-transfer regime that could allow current-year non-capital losses to be transferred between a parent corporation and its wholly owned subsidiaries, as well as between sister corporations.

Although still at the consultation stage, a loss-transfer regime could simplify planning and allow losses to be used more efficiently within profitable corporate groups.

Increased CRA Penalties

Budget 2026 proposes to increase numerous tax penalties that have remained unchanged for many years. The proposed penalty levels are outlined below:

Budget 2026 also proposes to double the base penalty for repeated failures to comply where the obligation is not subject to a more specific penalty.

International Tax Measures

Reduced Withholding on Taxable Canadian Property

Currently when a non-resident sells taxable Canadian property, purchasers are currently required to withhold the following amounts:

• 25% of the purchase price for most capital property.

• 50% of the purchase price for certain other taxable Canadian property.

The budget proposes that for dispositions on or after January 1, 2027, Budget 2026 proposes to reduce the withholding rates to:

• 15% for most capital property.

• 30% for certain other taxable Canadian property.

Trust Distributions to Non-Residents

Current rules generally prevent tax-deferred distributions of trust property directly to non-resident beneficiaries.

Budget 2026 proposes to expand the anti-avoidance rules to address certain indirect planning structures involving corporations and partnerships with non-resident ownership. The proposed rules would apply to distributions on or after November 5, 2026.

Trust structures with non-resident beneficiaries should be reviewed carefully, particularly where cross-border family or estate planning is involved.

Please contact your RMR team member to discuss how these proposals may affect you.