At a glance
- Budget 2026 introduces the Canada Growth Incentive (CGI) capital gains exemption for qualifying shares of eligible private corporations.
- The instalment threshold rises from $3,000 to $7,500 per year (from $1,800 to $4,500 for Quebec residents), effective 2028.
- The personal tax return due date moves to May 15 for all individuals, starting with the 2027 taxation year.
- The Form T1135 filing threshold increases from $100,000 to $200,000.
- Optional flat amounts are proposed for several deductions and credits, beginning in 2027.
- Objection deadlines are extended for individuals and graduated rate estates.
- CGI rollover rules for small business investments are updated to allow up to five years for reinvestment.
This article will be available in French shortly.
Budget 2026 proposes a range of personal tax measures that aim to reduce filing complexity and support investment in Canadian businesses. Highlights include a new Canada Growth Incentive (CGI) capital gains exemption for qualifying shares, simplified instalment and filing rules, optional flat-amount deductions and credits, extended objection deadlines, and updated rollover provisions for small business investments. The following summarizes the key proposals.
What is the Canada Growth Incentive (CGI) capital gains exemption?
This budget proposes a new capital gains exemption on the disposition of qualifying shares of a qualifying corporation, the Canada Growth Incentive (CGI) capital gains exemption.
This is a limited time new incentive, which would apply in respect of the gain from the disposition of qualifying shares of a qualifying corporation issued on or after Nov. 5, 2026 and before 2037, for capital gains up to $15 million.
This is different from the lifetime capital gains exemption (LCGE), in that this new exemption will apply separately to each qualifying individual in respect of each business.
Key elements of this proposed incentive are as follows:
Qualifying individual
- is an individual other than a trust who was at least 18 years old at the time they acquired a qualifying share
- has been resident in Canada throughout the year in which they claim the exemption
The claim would relate to a capital gain realized on the disposition of qualifying share of a qualifying corporation in the year or a preceding taxation year.
The proposals set out various conditions for the nature of the shares and the nature of the business in order to the be eligible to claim this exemption. One key element is that the share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation.
Alternative Minimum Tax (AMT)
Similar to capital gains qualifying for the LCGE, this new exemption will also have a 30% inclusion rate for the purposes of AMT.
However, large adjustment items such as 30% of a large gain, effectively create a permanent minimum tax, because it is very difficult to have sufficient highly taxed income in the next seven years to fully offset minimum tax with regular tax.
Interaction with other capital gains exemptions
A CGI exemption claimed on qualifying shares of a qualifying corporation could limit the ability of a qualifying individual to claim the LCGE on a sale of shares of the same corporation. Similarly, a LCGE claimed on the sale of shares of a corporation would limit the ability of a qualifying individual to claim the CGI exemption on the sale of shares of that same corporation.
However, a qualifying individual could generally claim both the capital gains exemption on a sale to an Employee Ownership Trust or a worker cooperative and the CGI exemption on the same sale of shares, with the use of one exemption having no impact on the limit available under the other exemption.
How is the 2026 budget simplifying tax filings?
Several 2026 budget measures aim to reduce the administrative burden of tax filing for individuals.
Instalments
This budget proposes to reduce the number of individuals who will be responsible for making tax payments by instalments by raising the minimum amount of tax used to determine instalments from $3,000 per year to $7,500 per year (or $1,800 per year for Quebec residents to $4,500 per year), and indexing these thresholds, rounded to the nearest $500, effective for the 2028 and subsequent taxation years.
Individuals whose primary source of income is from business, including commission income, will be allowed to make a single annual instalment payment, instead of quarterly instalments. The single instalment payment would be due Dec. 31 and would need to be equal to two thirds of their combined federal-provincial net tax owing for the year. This measure would also apply starting for the 2028 taxation year.
When is the new personal tax return due date?
This budget proposes to change the due date of personal income tax returns to May 15 for all individuals. These changes will be applicable starting with the 2027 taxation year.
Foreign Income Verification Statement – Form T1135
All Canadian resident taxpayers, and certain partnerships, must file a Foreign Income Verification Statement (Form T1135) if they own certain property outside Canada with an aggregate specified total cost of more than $100,000 at any time in a taxation year or fiscal period.
Budget 2026 proposes to increase the threshold above which Form T1135 must be filed from $100,000 to $200,000. In addition, the threshold for simplified reporting will be increased from less than $250,000 to less than $500,000 effective for taxation years or fiscal periods that end after 2026.
Optional flat amounts for personal income tax deductions and credits
Budget 2026 proposes optional flat-amount calculation methods for certain deductions and credits, beginning with the 2027 taxation year. Individuals would still need to ensure they meet the eligibility requirements but would no longer need to keep receipts and itemize expenses. Eligible deductions and credits include among other measures the following:
- Moving expense deduction: Budget 2026 proposes to allow individuals who make an eligible relocation to deduct a flat $1,000 in respect of the relocation.
- Home accessibility tax credit: This credit allows certain eligible individuals to claim up to $20,000 in qualifying home renovation or alteration expenses per calendar year. Budget 2026 proposes to allow to calculate the credit using a one-time optional flat-expense amount of $1,000 for a year, subject to conditions.
- Adoption expense tax credit: This credit allows adoptive parents to claim up to $19,972 in eligible adoption expenses in 2026 related to the adoption of a child under 18 years old. Budget 2026 proposes to allow eligible adoptive parents to calculate the credit using an optional flat expense amount of $1,200 per adopted child.
Objections to assessments
Taxpayers generally have 90 days after a notice of assessment is sent to file a notice of objection. Where the deadline is missed, taxpayers have a one-year timeframe to apply for an extension of time.
Budget 2026 proposes to extend the deadline to file a notice of objection as follows:
- For individuals and graduated rate estates: The later of one year after the notice of assessment is sent and two years from the tax return filing due date for the taxation year being assessed
- Other taxpayers: One year after the day the notice of assessment is sent.
This measure would apply to assessments sent on or after the day that is three months after royal assent.
Canada Growth Incentive – Rollover for investments in small businesses
For individuals who sell qualifying small business corporation shares and reinvest the proceeds in other eligible small business corporation shares, the current rules generally allow the deferral (not elimination) of the relevant capital gain. The deferral is limited to the portion of the proceeds that is reinvested.
The issuing corporation must generally be a Canadian-controlled private corporation (CCPC) that carries on an active business primarily in Canada, with all or substantially all (generally at least 90%) of its assets used principally in that business throughout the ownership period. Replacement shares must generally be newly issued to the individual during the disposition year or the following calendar year.
Budget 2026 proposes to:
- Extend the period to include the year of disposition and the three following calendar years;
- Introduce a special provision for individuals who have entered into agreements for future equity;
- Lower the threshold from “all or substantially all” (generally at least 90%) to primarily (generally at least 50%) for the asset use test that must be met throughout the ownership period; and
- The active business would be required to be carried on primarily in Canada at the time of share issuance and for a continuous period immediately following issuance.
These measures would apply to qualifying dispositions that occur on or after Jan. 1, 2027.
The information in this publication is current as of November 5, 2026
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