The federal government has postponed implementing the capital gains tax hike.
Canada’s Department of Finance announced on Friday that it will introduce legislation in Parliament to delay the enforcement of the capital gains inclusion rate change from June 25, 2024, to January 1, 2026.
Proposed changes to the capital gains tax were announced by the federal government in its budget last April and introduced as a ways and means motion in the House of Commons in June. The bill did not pass due to pushback from the Conservatives.
The Government of Canada is deferring the date on which the capital gains inclusion rate would increase to January 1, 2026 to provide certainty to Canadian taxpayers and businesses.
Learn more about what this means for you: https://t.co/hRqmizbZVS pic.twitter.com/E9Tnf25Dro
— Finance Canada (@FinanceCanada) January 31, 2025
The tax hike would impact a small portion (0.13%) of the wealthy population. According to the government, the inclusion rate would be increased from one-half to two-thirds for any Canadian individual or corporation that makes over $250,000 per year in capital gains.
“The Canada Revenue Agency (CRA) has reverted to administering the currently enacted capital gains inclusion rate of one-half,” reads the finance department’s announcement. “This means that all capital gains realized before January 1, 2026, will be subject to the currently enacted inclusion rate of one-half, unless an exemption applies.”
According to the government, the CRA will issue forms to individuals subject to the capital gains tax that have been reverted to the current rate in the coming weeks.
“The CRA will grant relief in respect of late-filing penalties and arrears interest until June 2, 2025, for impacted T1 Individual filers and until May 1, 2025, for impacted T3 Trust filers to provide additional time for taxpayers reporting capital dispositions to meet their tax filing obligations,” reads the announcement.
In response to the postponement, the Canadian Taxpayers Federation says it will continue to fight to scrap the capital gains tax hike altogether.
“This is a huge win for taxpayers who stood up and fought back against a tax grab that would illegally take billions of dollars from Canadians,” said Franco Terrazzano, CTF federal director, in a statement. “Now the fight will continue until the capital gains tax hike is permanently scrapped.”
With Parliament prorogued until March 24, the fate of the capital gains tax hike is still uncertain.
The House defines the prorogation of Parliament as “the termination of a session.” During this period, bills that haven’t passed into law “die,” but the government can choose to revive them once Parliament is back in session.
However, that doesn’t guarantee a smooth passing of the capital gains tax bill. Efforts could be squandered if the Liberal government doesn’t survive a non-confidence vote, which will likely happen soon after prorogation ends.
On top of that, Deputy Prime Minister Chrystia Freeland, who is arguably the frontrunner in the Liberal leadership race, has reportedly said she would scrap the increase if elected.
In light of the government’s announcement, the CRA says it’s working as quickly as it can to adjust its systems and forms so taxpayers who need to report capital dispositions can do so as early as possible.