Budget Day 2024 has introduced a host of changes that are bound to impact small business owners across Canada. As a proactive firm dedicated to equipping our clients with essential knowledge, Capex CPA has distilled the budget into ten crucial areas you need to understand to navigate the fiscal landscape effectively in 2024 and beyond.

1. Capital Gains Inclusion Rate

Starting June 25, 2024, the inclusion rate for capital gains will increase from 50% to two-thirds. This change will affect dispositions occurring on or after this date. However, individuals will still benefit from a 50% rate on the first $250,000 of capital gains each year until the end of 2024, while corporations and trusts will face the higher rate on all gains. It’s advantageous to realize long-term capital gains before June 25 to capitalize on the lower current tax rate.

2. Lifetime Capital Gains Exemption

The exemption cap will increase to $1,250,000 from $1,016,836, starting June 25, 2024. This change allows individuals to sell their business to another person, under Canadian Controlled Private Corporation Shares, tax-free up to the new limit.

3. Canadian Entrepreneurs’ Incentive

From 2025, certain shares will benefit from a reduced capital gains inclusion rate of 25% or one-third, provided the taxpayer is a founding shareholder with significant interest and has been actively involved in the business for at least five years.

4. Employee Ownership Trust Tax Exemption

This exemption, available from January 1, 2014, to December 31, 2026, allows for a $10 million capital gains exemption when selling shares to an employee ownership trust during a qualifying business transfer.

5. Canada Disability Benefit

Starting in July 2025, Canadians aged 18 to 64 eligible for the disability tax credit will receive a new benefit with a maximum annual payout of $2,400.

6. Alternative Minimum Tax (AMT) Adjustments

The AMT will be refocused more effectively on high-income individuals and certain trusts, with increased donation tax credits and partial deductibility of interest and financing costs.

7. Canada Carbon Rebate for Small Businesses

This rebate will be automated and expedited for eligible Canadian Controlled Private Corporations (CCPCs) with fewer than 499 employees, calculated per employee in provinces under the federal fuel charge.

8. Accelerated Capital Cost Allowance (CCA)

New eligible purpose-built rental projects starting construction between April 16, 2024, and January 1, 2031, will benefit from a 10% accelerated CCA rate. Immediate 100% CCA expensing will apply to new acquisitions in three specified classes if acquired and in use between April 16, 2024, and January 1, 2027.

9. Crypto Reporting Asset Framework

Crypto-asset service providers will need to report transactions including exchanges between crypto-assets and fiat currencies, other crypto-assets, and transfers over $50,000. Additionally, they must collect detailed customer information for compliance with regulatory oversight.

10. Home Buyers' Plan Enhancements

The withdrawal limit for the Home Buyers' Plan has been increased from $35,000 to $60,000 for withdrawals made after Budget Day 2024. Additionally, for first-time withdrawals between January 1, 2022, and December 31, 2025, the start of the 15-year repayment period is deferred by three years, starting in the fifth year after the first withdrawal.

Final Thoughts:

These changes present both challenges and opportunities for small business owners. Staying informed and planning ahead with a trusted advisor like Capex CPA can help you navigate these changes efficiently and capitalize on new benefits to optimize your financial strategies. If you need personalized advice or have any questions about how these changes affect your business, don't hesitate to contact us at Capex CPA. Together, we can ensure that your business not only survives but thrives in the changing economic landscape.