Carney cancels planned hike to capital gains tax

Prime Minister Mark Carney says his government will cancel the proposed hike to the amount of capital gains that are subject to tax.

In a statement, the Liberal government said that cancelling the increase will help small businesses and boost private investment that will create jobs.

"Cancelling the hike in capital gains tax will catalyze investment across our communities and incentivize builders, innovators and entrepreneurs to grow their businesses in Canada," Carney said in a statement. 

The statement also said the government will maintain its increase in the lifetime capital gains exemption limit to $1.25 million "on the sale of small business shares and farming and fishing property."

The Liberal government said it will introduce legislation to formalize changes to the exemption limit "in due course."

The decision to axe the increase follows former prime minister Justin Trudeau's decision to defer it until New Year's Day 2026.

The increase to the share of taxable capital gains was first announced in the 2024 federal budget. 

A capital gain is the difference between the cost of an asset — such as an investment property, a stock or a mutual fund — and its sale price.

Right now, only half of capital gains are taxable. Those capital gains are added to a person's income and are taxed at their marginal income tax rate.

Had the changes gone through, individuals with annual capital gains over $250,000 would have had two-thirds of those gains taxed. Two-thirds of all capital gains earned by corporations and trusts would also have been taxed.

Doctors, businesses, Conservatives opposed tax

The legislation to implement the change was still being debated when Parliament was prorogued.

The proposed capital gains changes, like all bills that had yet to receive royal assent, died on the order paper. They would have to be reintroduced at the next session of Parliament as if they never existed. 

Since it was first announced, a number of groups have expressed concerns about the capital gains changes. 

The Conservatives said they would result in "a tax on health care, home-building, small businesses, farmers and people's retirements."

Doctors also opposed the change, saying it could undermine efforts to recruit and retain physicians. 

The Canadian Medical Association (CMA) has said doctors will be hit particularly hard by the hike because they often incorporate their medical practices and invest for their retirements through their corporations.

Canada is facing a severe doctor shortage. An estimated 6.5 million Canadians are going without access to primary care as family physicians retire and medical schools struggle to recruit new residents.

A coalition of Canadian agricultural associations also signed a letter asking the federal government to abandon the change to the capital gains tax, among other measures.

The Canadian Federation of Independent Business said that 72 per cent of its members oppose the change and believe it would harm investment.