By Alice McFarlane

Changes to capital gains tax not for everyone

May 2, 2024 | 5:20 PM

A national organization representing Canadian business is putting pressure on the federal government to clarify rules surrounding capital gains proposals contained in last month’s budget.

One item being scrutinized by the Canadian Federation of Independent Business (CFIB) is the new Canadian Entrepreneurs Incentive. Qualifying businesses would receive additional relief from the capital gains tax, above the lifetime exemption.

The issue is some businesses are eligible while others are not, according to CFIB National President Dan Kelly.

“If you run a restaurant, you’re excluded. If you run a retail shop, you’re included. If you run an accounting business, you’re excluded. But if you run a manufacturing business, you are included. It really just draws a line between the business community,” Kelly said. “We estimate at CFIB that about half of Canada’s businesses would benefit from a preferential capital gains inclusion rate.”

There are plenty of unanswered questions about the federal government’s proposed changes. Kelly said, as an example, an incorporated farm would be eligible, but not an un-incorporated farm.

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“We have yet to get an explanation from Ottawa as to why some groups are in and some groups are out,” he said.

CFIB will be continuing to fight to ensure that all businesses, including all farms, whether they’re unincorporated or not, get access to the lower inclusion rate on the next $2 million upon a sale. CFIB members participated in a national webinar on Tuesday. Kelly said the membership has lots of questions.

“Where can they get a straight answer? It’s certainly not coming from government just yet. The government has yet to put detailed legislation in place for even people to have a look at. Sadly, we’re having to make a whole bunch of assumptions as to how these rules are going to work right now. As a result, this is still a bit of a confusing mess,” he said.

The federal Liberals have yet to introduce the proposed changes in Parliament, even though the finance minister stated in last month’s budget that Jun. 25 would be the target date.

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alice.mcfarlane@pattisonmedia.com

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