The Canada Revenue Agency (CRA) has confirmed it will implement proposed changes to the capital gains tax inclusion rate effective June 25, 2024, even though Parliament is currently prorogued.
A capital gain occurs when you sell something valuable, like property or investments, for more than you originally paid. Previously, only half of that profit was counted as part of your income (known as the inclusion rate). However, under the new rules, if you earn more than $250,000 in capital gains, the amount over that threshold will be taxed at a higher rate of two-thirds.
The government announced these changes last year, aiming to create a more balanced tax system and ensure higher-income earners and businesses pay more taxes on substantial profits.
However, former Ontario Real Estate Association president Ray Ferris disagrees, suggesting the policy could have unintended consequences.
He notes that concerns are already surfacing among property owners.
Despite the CRA’s decision to proceed, Ferris points out that there is still hope for those worried about the changes, as the proposed measures have not yet received final approval from the government.
For cottage and property owners concerned about these adjustments, Ferris offers advice on navigating the uncertainty, hope that the tax is never passed into law. He adds if it is, you can claim a refund.
The Department of Finance has clarified that taxation proposals generally take effect when tabled, ensuring consistent treatment of taxpayers.
However, the CRA’s audit manual specifies that taxpayers are not obligated to file under proposed legislation unless it benefits them, potentially allowing for refunds if the measures are later abandoned.