The Government of Canada tabled its 2026 Federal Budget on November 5, 2026. The budget introduces several proposed tax measures aimed at encouraging business investment, supporting individuals and families, and simplifying tax compliance.
Key proposals include a new capital gains exemption for qualifying business investments, expanded SR&ED incentives, changes to individual tax filing deadlines and enhanced personal tax credits and deductions.
The following summarizes the key proposed tax measures that may be relevant to our clients. These measures are proposals and are not law until enacted. Further details are available in the budget’s table of contents
Filing and Compliance
Income Tax Filing and Payment Deadlines
Beginning with the 2027 taxation year, all individuals, including self-employed individuals and their spouses or common-law partners, would have until May 15 to file their income tax returns and pay outstanding balances.
Tax Instalment Thresholds
For taxation years beginning on or after January 1, 2028, the instalment thresholds would increase to:
- $7,500 for individuals outside Quebec and corporations.
- $4,500 for Quebec residents.
Eligible individuals whose primary income is business, professional or commission income could elect to make one annual instalment equal to two-thirds of their combined federal and provincial net tax, due December 31.
Foreign Property Reporting – Form T1135
For taxation years or fiscal periods ending after 2026:
- The general reporting threshold would increase from $100,000 to $200,000.
- The simplified reporting threshold would increase from $250,000 to $500,000.
Personal Benefits, Credits and Deductions
Budget 2026 proposes several changes to personal tax benefits and deductions:
Canada Groceries and Essentials Benefit
A one-time, non-taxable supplement in early 2027 of up to $223 per adult, $117 per child and $117 for the single supplement.
Build Canada Workers Benefit
The maximum benefit would increase to $1,859 for a single individual without children and $3,143 for a family, beginning in 2027.
Canada Caregiver Credit
The credit would become refundable beginning in 2027, with maximum amounts of $9,001 for an infirm adult dependant and $2,812 for other eligible dependents.
Volunteer and Search-and-Rescue Credits
The existing credits would be combined into a single 14% non-refundable credit based on $6,000, subject to a minimum of 200 eligible service hours.
Optional Flat-Rate Deductions
Eligible individuals could elect prescribed flat amounts instead of calculating certain actual expenses, including moving expenses ($1,000), adoption expenses ($1,200 per child), home accessibility expenses ($1,000) and qualifying service-dog expenses ($2,000). Other eligible categories would also be included.
Business Tax
Corporate Loss Transfers
Budget 2026 proposes allowing current-year non-capital losses to be transferred between wholly owned Canadian corporations within the same corporate group, subject to a joint election and other conditions. The government is consulting on the proposed rules and related tax-integrity measures.
SR&ED Tax Incentives
The budget proposes expanding the SR&ED program to include certain testing, validation and studies required for initial regulatory approval or certification. Certain intellectual property protection costs, including patents and copyrighted software, would also qualify, subject to applicable conditions.
Other Tax Measures
Canada Growth Incentive
A new capital gains exemption would allow qualifying Canadian-resident individuals to exempt up to $15 million in capital gains per individual, per qualifying business, on eligible shares issued after Budget Day and before 2037.
Key conditions would include:
- The individual must be at least 18 when acquiring the shares and remain a Canadian resident throughout the year of the exemption claim.
- The corporation must generally be a CCPC with combined assets not exceeding $100 million, including related corporations.
- The business must satisfy Canadian business activity and asset-use requirements.
- The shares must generally be held for at least 36 consecutive months before disposition.
Certain professional practices and industries would be excluded. The exemption would also interact with the existing Lifetime Capital Gains Exemption, generally restricting the use of both exemptions on shares of the same corporation.
Small-Business Share Rollover
For qualifying dispositions occurring on or after January 1, 2027, the replacement-share acquisition period would generally be extended to the disposition year plus three subsequent calendar years. Certain arrangements could extend the period to five years.
Non-Resident Withholding on Canadian Property
The withholding tax rates on certain dispositions of taxable Canadian property by non-residents would be reduced:
- From 25% to 15% for capital property other than specified taxable Canadian property.
- From 50% to 30% for specified taxable Canadian property.
Trust Distributions to Non-Residents
The budget proposes strengthening the rules governing tax-deferred distributions of trust property to non-resident beneficiaries, including certain indirect transfers through corporations and partnerships. The changes would apply to distributions occurring on or after November 5, 2026.
GST/HST – Health Care Services and Medical Devices
GST/HST relief would be expanded to include:
- Exempt treatment for qualifying services provided by massage therapists.
- Zero-rated treatment for devices specifically designed for alternating electric field therapy for individuals with cancer.
Conclusion
The 2026 Federal Budget introduces several proposed changes that may affect business investment, personal tax planning and tax compliance. Individuals and businesses should consider how these proposals may impact their circumstances as the measures progress toward legislative approval.
The proposed measures remain subject to legislative approval and are not law until enacted.
References
Government of Canada. (2026). Budget 2026: Table of contents. https://budget.canada.ca/2026/report-rapport/toc-tdm-en.html
RSM Canada. (2026). 2026 federal budget commentary. https://www.rsmcanada.com/insights/services/business-tax-insights/federal-budget-commentary-2026
