Canada’s Liberal government has released its proposed budget for 2024, which is headlined by capital gains tax increased for corporations and individuals earning beyond a defined threshold. The changes are said to impact the top 0.13% of Canadians as per the federal government, as well as corporations that record capital gains.
“Budget 2024 announces the government’s intention to increase the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds, by amending the Income Tax Act, effective June 25, 2024,” reads the budget.
The changes, which are expected to generate $21.9 million in new revenue over the next five years, are expected to partially offset new funding by the government. The Department of Finance provided an example for the changes, which identified that if an Ontario resident had an income of $400,000 annually and sold a $300,000 second property, under current rules they would pay taxes on $150,000 of the sale. Under new rules, they would pay taxes on $158,333 of the sale, resulting in $4,461 in further taxes.
On the corporate side of things, the changes are expected to impact 12.6% of corporations, with 87.4% of corporations in 2022 not reporting any capital gains.
The change is expected to move the marginal effective tax rate from 14.5% in 2024 to that of 16.8% in 2028.
The budget overall is to result in $39.2 billion in net-new spending, with no timeline as to when the budget will actually be balanced. Total new spending is estimated at $52.9 billion, which is to be offset by $20 billion in new tax revenue.
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