Last updated November 6, 2026. We’ll update this post as measures become law.
The 2026 Federal Budget, "Masters of our destiny," was tabled on November 5, 2026, by Finance Minister François-Philippe Champagne. It introduces a new $15 million capital gains exemption, a single May 15 personal filing deadline, higher instalment and foreign reporting thresholds, and tougher compliance measures. Personal and corporate tax rates are unchanged.
Below, the team at Lekadir LLP summarizes the key changes for individuals, business owners and families. All measures are proposals as of the budget's release and may change before they become law.
Key Takeaways
$15 million capital gains exemption on qualifying new shares of Canadian businesses, with strict conditions and many sectors excluded
One filing deadline of May 15 for all individuals, starting with 2027 returns filed in 2028
Higher thresholds: instalments from $3,000 to $7,500, and Form T1135 from $100,000 to $200,000
Tougher compliance: higher penalties for larger taxpayers and repeat failures, and CRA reporting of tax debts over $50,000 to credit bureaus
Nothing is law yet. Some measures would apply from Budget Day if enacted; others start in 2027 or 2028
Who This Affects
Business owners: sections 1, 2 and 7
Incorporated professionals: sections 2, 3, 5 and 7 (and section 1, mainly to confirm you are excluded)
Founders and investors: sections 1, 4 and 8
Non-resident vendors and their purchasers: section 8
Self-employed individuals: sections 3 and 6
Families: sections 4 and 6
Retirees and pre-retirees: sections 5 and 6
1. A New $15 Million Capital Gains Exemption
The Canada Growth Incentive
The proposed Canada Growth Incentive (CGI) would let qualifying Canadian-resident individuals exempt up to $15 million of capital gains per business on qualifying shares. The headline is large, but eligibility is narrow:
Shares must be newly issued, directly to the individual (or a partnership of which they are a member), for cash or qualifying employment services on or after November 5, 2026, and before 2037
The investor must be at least 18 when acquiring the shares and be resident in Canada throughout the year the exemption is claimed
The corporation must be a Canadian-controlled private corporation at issuance, with related-group assets (carrying value) of no more than $100 million immediately before and after issuance
Active-business asset tests apply, the business must be carried on primarily in Canada for at least 24 months after issuance, and shares must be held for at least 36 consecutive months before sale
Many businesses are excluded, including professional practices (such as accounting, law, health care, engineering and architecture), consulting, businesses whose main asset is the reputation or skill of their employees, real estate, financial services, insurance, agriculture, fishing, forestry, mining, utilities, food and accommodation, arts, recreation, entertainment, and franchised or licensed businesses. For owners of medical practices, accounting firms, consulting businesses and real estate companies, incorporation alone would not create access to this exemption.
Three planning points:
A CGI claim and a Lifetime Capital Gains Exemption (LCGE) claim would limit each other for shares of the same corporation.
The exception is a sale to an Employee Ownership Trust or worker cooperative, where both can be used without affecting each other's limits.
30% of an exempt CGI gain would still be included in the alternative minimum tax calculation, the same treatment as LCGE gains.
More Time to Reinvest Small-Business Sale Proceeds
For dispositions from January 1, 2027, the section 44.1 rollover would be enhanced in two ways:
Longer replacement period: individuals would have the year of sale plus three years to buy eligible replacement shares, or up to five years if they enter into a SAFE (simple agreement for future equity) within the three-year window. Proceeds not ultimately reinvested would be taxed, with prescribed interest.
Easier active-business test: the asset test that must be met throughout the ownership period would drop from "all or substantially all" to "primarily."
Planning a share issuance, sale or reorganization? Talk to our team before you act.
2. Business Tax Measures
Productivity Mega Deduction
The budget confirms the Productivity Mega Deduction announced in September 2026, which would allow an immediate deduction for a broader range of capital investments. The budget lists example assets in construction, restaurants, farming, tourism and hospitality, health care and transportation. An immediate deduction reduces taxable income; it does not reimburse the purchase price.
Relief for Preferred-Share Dividends
CCPCs would be exempt from Part VI.1 tax on taxable preferred-share dividends paid on or after November 5, 2026. For other corporations, the dividend allowance would rise from $500,000 to $1.5 million, and the threshold at which it is reduced would rise from $1 million to $3 million, for taxation years ending after 2026.
Fewer Documents for Corporate Elections
Certified copies of directors' resolutions would no longer need to be filed with certain elections, including capital dividend elections, for elections made after the legislation receives Royal Assent.
Corporate Loss Transfers (Consultation)
Finance is consulting on letting certain wholly owned corporate groups transfer current-year non-capital losses through a joint election. Comments are due January 8, 2027.
Expanded SR&ED Support
For taxation years beginning on or after November 5, 2026, the SR&ED program would cover:
Testing, technological validation and studies required for initial regulatory approval or certification
Costs of registering and maintaining intellectual property protection developed through qualifying SR&ED work
The work must relate directly to an eligible SR&ED project. Costs of enforcing intellectual property rights would be excluded.
3. Filing Deadlines and Instalments
A Single May 15 Deadline
Starting with the 2027 tax year, all individuals, including the self-employed and their spouses or common-law partners, would file and pay by May 15. The first returns affected would be those filed in 2028. Deadlines for 2026 returns filed in 2027 do not change.
Higher Instalment Thresholds
For taxation years beginning in 2028, instalment thresholds would rise, and would then be indexed and rounded to the nearest $500:
Individuals outside Quebec: $3,000 to $7,500
Quebec residents (federal): $1,800 to $4,500
Corporations (federal): $3,000 to $7,500
Starting in 2028, individuals whose main income is from a business (including professional or commission income) could make one annual instalment of two-thirds of their combined federal-provincial net tax owing by December 31, with the rest due on the balance-due date.
4. Foreign Reporting and Family Trusts
Higher T1135 Thresholds
For taxation years ending after 2026, the Form T1135 reporting threshold would rise from $100,000 to $200,000 of cost, and the simplified reporting threshold would rise from $250,000 to $500,000. The obligation to report foreign income does not change.
Trust Distributions to Non-Residents
The existing denial of tax-deferred trust rollouts to non-resident beneficiaries would be extended to indirect distributions. This includes property distributed to a corporation or partnership that has direct or indirect non-resident shareholders or partners. The change would apply to distributions on or after November 5, 2026. Families planning distributions, especially near a trust's 21-year anniversary or where any family member lives outside Canada, should review them first.
5. Retirement and Pensions
"RRSP for Life" (Consultation)
The government is consulting on merging RRSP and RRIF features into one plan, removing the need to convert at age 71. Minimum withdrawals after 71 would remain. Comments are due January 8, 2027.
Revoked Pension Plans (All RPPs, Including IPPs)
For revocations after 2026, any revoked registered pension plan would:
Pay a 10% special tax on the fair market value of its property immediately before revocation, which the CRA could waive or cancel
Be treated as a retirement compensation arrangement (RCA), with its remaining assets deemed contributed to the RCA, which triggers the RCA's 50% refundable tax
Individual Pension Plans
The IPP definition would expand on January 1, 2027, to capture more defined benefit plans with related members. From January 1, 2028:
Anti-avoidance rules: IPPs would face the same advantage, prohibited-investment and non-qualified-investment rules as other registered plans of controlling individuals. The controlling individual would owe tax equal to 50% of the fair market value of a non-qualified or prohibited investment, and 100% of the value of an advantage.
Excess surplus: a plan with assets above 200% of its pension liabilities would become revocable. The CRA would have to give at least 30 days' notice of its intent to revoke, allowing time to withdraw excess amounts.
IPP holders should review plan funding levels and investments well before 2028.
6. Support for Households
The budget also includes several measures aimed at low- and modest-income households:
Canada Caregiver Credit becomes refundable from 2027
One-time Canada Groceries and Essentials Benefit supplement in early 2027: up to $223 per adult, $117 per child and $117 for the single supplement
Build Canada Workers Benefit replaces the Canada Workers Benefit, with maximums of $1,859 for single individuals and $3,143 for families in 2027; advance payments end in 2028
Optional Flat-Amount Claims
Taxpayers could choose a flat amount instead of tracking actual expenses for:
Moving expenses: $1,000 per eligible relocation (2027)
Clergy residence deduction: $1,000 per eligible month, up to $12,000 (2027)
Labour mobility deduction for tradespeople: $1,500 per year (2027)
Home Accessibility Tax Credit: $1,000, once per lifetime (2027)
Adoption expenses: $1,200 per child (2027)
Gluten-free food for individuals with celiac disease:$1,000 per year (2026)
Incontinence products: $500 per year (2027)
Service-dog expenses: $2,000 per year (2027)
The gluten-free, incontinence and service-dog amounts are expense amounts claimed under the medical expense tax credit, not credit amounts, so the usual income-based threshold still applies. Detailed claims may still produce a better result, so keep your receipts.
7. Compliance Changes
Higher Penalties
For taxation years ending after 2027:
Inflation adjustment: most fixed-dollar penalties would increase to account for inflation since enactment. Older penalties would rise by two to three times, while most recent penalties would stay the same. Amounts would then be indexed every five years.
Size-based penalties: individuals and smaller corporations and partnerships would pay the base amount, medium-sized corporations and partnerships three times the base, and large ones eight times.
Repeated failures: new penalties would generally double the base penalty for repeated failures to file or comply after a CRA notice or demand.
For corporations, size would be based on the taxable capital the corporation and its related corporations employ in Canada: medium means more than $10 million up to $50 million, and large means more than $50 million. For partnerships, size would be based on gross revenue: medium means $2 million to less than $10 million, and large means $10 million or more.
Credit Bureau Reporting
After Royal Assent, the CRA could report tax and GST/HST debts over $50,000 to credit bureaus. This would apply only after objection and appeal rights are exhausted or have expired, with at least 30 days' written notice and an opportunity to arrange repayment.
More Time to Object
The deadline to file a notice of objection would extend from 90 days to one year after the assessment is sent. For individuals and graduated rate estates, it would be the later of that date and two years after the return's filing due date, with no need to request an extension. The change would apply to assessments sent three months or more after Royal Assent.
8. Other Measures
Section 116 withholding for non-resident corporate vendors falls from 25% to 15% for most taxable Canadian property, and from 50% to 30% for specified property such as real estate and depreciable property, from January 1, 2027
Qualifying massage therapy services become GST/HST-exempt
Clean Electricity and Clean Technology credits extended to property available for use before 2041
Intergenerational farm and fishing rollovers extended to nieces, nephews, grandnieces and grandnephews (including those of a spouse or common-law partner) from January 1, 2027
Mineral exploration tax credits (METC and CMETC)extended to flow-through share agreements entered into on or before March 31, 2032
Private foundations: the excess corporate holdings regime would be eliminated for taxation years beginning on or after January 1, 2027
Previously announced measures, including non-profit organization reporting and the July 23, 2026 draft amendments, will proceed
What This Means for You
Budget 2026 rewards new investment in Canadian businesses and simplifies several filing rules, while raising the cost of noncompliance.
For business owners, the priority is reviewing planned share issuances, capital purchases, pension plans and corporate structures against the new rules.
For families, the focus is on foreign reporting, trust distributions, retirement plans and new credits.
To understand how these proposals affect you, contact the team at Lekadir LLP for tax planning, compliance and advisory support.
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This article provides general information based on Budget 2026 as released on November 5, 2026. Proposed measures may change before enactment. It is not tax, legal or financial advice; obtain advice specific to your circumstances before acting.
