Advertisement
The federal government’s capital gains inclusion rate increase has yet to become law. There’s a slight chance it may never come to pass.
In its 2024 budget, the federal government proposed to increase the capital gains inclusion rate. In April, it gave Canadians just over two months’ notice before the potential changes were to come into effect on June 25, 2024. Here’s how the situation has played out since then.
The capital gains inclusion rate would change for capital gains realized on or after June 25, 2024. Instead of the one-half (50%) capital gains inclusion rate that has applied since 2000, exempting one-half of a capital gain from tax, the following would apply:
The federal government introduced a notice of ways and means motion on June 10 to amend the Income Tax Act and outline the capital gains tax change. The motion passed, but the amendment must still be formally made into law. A subsequent notice of ways and means motion containing a draft version of the bill was tabled on September 23 but has not yet passed.
There have been two non-confidence votes for the Liberals initiated by the Conservatives this fall, aimed at setting in motion a federal election. One option for the prime minister is to prorogue parliament to take the political pressure off temporarily. This would effectively suspend parliament, and house committees would need to be re-established. Legislative changes, like the capital gains inclusion rate amendment in the Income Tax Act, could continue to be delayed.
If there was an election prior to the tax change being enacted into law, there is at least a chance it never comes to pass.
There’s a possibility those who opted to sell investments prior to June 25 to trigger capital gains at a lower tax rate will have done so unnecessarily. They may end up paying tax they could have deferred by not selling in the first place.
Those who sold real estate in a rush may be particularly disappointed. The short time horizon to sell may have led to sellers accepting lower prices to close prior to June 25. Many buyers knew this and bid accordingly in an already weak housing market.
If the capital gains inclusion rate change does not pass and the Conservatives are elected, it seems unlikely they would proceed with the change after voting against the notice of ways and means motions twice. But anything is possible.
Tax planning can be difficult even when the rules are clear. When the rules are in flux and hinge on a government being able to pass a new law, there’s always a chance a taxpayer acts prematurely. Sometimes, a consultation period for a tax change can even lead the government to reconsider the amendment or delay it.
This fall has been a contentious time in U.S. politics with the recent election. A federal election is brewing in the next year in Canada, which promises to make for some political excitement on this side of the border as well.
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
What is the cost of buying your first home as a Gen Z? Find out the total costs you’re...
Many Canadians have questions about how accounts are transferred upon death. Here’s how it works when assets are held...
Concerned about the heavy tech weighting in U.S. stock indexes? Explore ETF alternatives for balanced exposure to U.S. equities.
Converting between U.S. and Canadian dollars can be costly. This technique can reduce the cost from 2% or more...
Plus, Trump wants to make crypto great again, Blackrock iShares launches a bitcoin ETF in Canada, and crypto coins...
The portfolio manager and podcast host shares insights on the importance of having long- and short-term financial goals. ...
First-time home buyers in Canada can pull from savings in registered accounts to fund their down payment. Here’s how...
You can’t just claim anything. In preparing to file your income tax return, you will need to save receipts...
To minimize taxes and maximize benefits, learn the difference between deductions, credits and other forms of tax relief by...
The federal government has made a last-minute change to its capital gains inclusion rate increase. However, other tax changes...
Is the government allowed to collect this new Capital Gains tax. Our accountant, and many others they know, are following the new rules b/c the gov’t bulletins have not told them anything new since June. According to them, the new Capital Gains increase is the law. Is it or isn’t it??
It is NOT the law and you do not need to pay this tax. However, this foolishness can become the law in the near future, and depending on how far back the Libs wanna go, if it’s June 25th 2024 or as of Jan 1, 2025, you would have to pay the additional tax if you made a capital gain. If there is an election, before it passes law, it would most likely die regardless of who wins but 100% if conservatives win. Then the capital gains tax would remain at 50% across the board. What a $hit show this is and has become..
This Liberal government is such a clown show. Even CRA does not know what’s going on. This capital gain inclusion rate change is a tax to punish prosperity and success that takes decades to achieve by many. SO UNFAIR AT ALL LEVELS. Again, tax the successful to death (and after death). That’s Canada for you.
If the Capital Gains increase is not passed into law by the end of 2024, and is ultimately passed in 2025, can it be made retroactive to June 2024?
This is a great article. I have had quite a time trying to decipher this current tax mess.
Appreciate your succinct and clear discussion.
Will the federal government refund capital gains if the new capital gains tax is not passed into law
As of 6 days ago, the CRA has enforced the “proposed” capital gains tax increase backdated to June 2024.
This proposal, has not been debated on or voted on in parliament in order for it to become law.
I confirmed it with a phone call to Davey at the CRA, employee #04607WRO, who also sent me the link.
The CRA site even aknowledges its a “proposal” but states it will enforce it as of last June.
Please call your MP and exercise your voice. This must be one of the worst undemocratic and illegal actions taken by a Canadian federal agency at the direction of the current liberal party.
Best
And where are Pierre Poilievre and the “Conservatives” on this??? As far as I can tell, they have done everything to avoid the issue, going so far as to refuse to even utter the term “capital gains taxes” after the Liberal budget. What they should have done immediately is state unequivocally that this new tax, if passed into law, would be repealed immediately upon their gaining power. Instead, they have decided to pander to the Left. Some of us have not forgotten the Conservative’s broken promises in the past regarding capital gains tax reform. This is the same party that thought Erin “not your Daddy’s Conservative” O’Toole would be a viable alternative to the Liberals. They are taking us for granted, and it is high time they feel some pressure from the Right.
I have heard th CRA is going ahead with this even though it hasnt passed. Is this legal for them to do that.