Prorogation of the Canadian Parliament – Tax Implications
On January 6, 2025, the federal government announced the prorogation of Parliament until March 24, 2025. As a result, all ongoing legislative business that had not yet received Royal Assent was either abandoned or expired. Therefore, for Parliament to consider these bills, they will need to be reintroduced in the House of Commons.
Several measures announced in the federal budget of April 16 last year are among the bills or proposals not yet adopted, including notably the increase in the capital gains inclusion rate, which was scheduled to rise from one-half (½) to two-thirds (⅔) as of June 25, 2024. Unfortunately, this creates uncertainty regarding the tax treatment of taxpayers’ income tax returns by tax authorities for the 2024 tax year. The outcome will only be known once parliamentary proceedings resume.
Increase in the Capital Gains Inclusion Rate
To ensure consistency with the fiscal directions announced by the government last April, the Canada Revenue Agency (“CRA”) has announced its intention to apply the new measures regarding the increase in the capital gains inclusion rate despite the prorogation of Parliament. Accordingly, federal income tax returns and related forms for 2024 will reflect the bills that have not yet received Royal Assent.
However, should the bill never be adopted by Parliament, the CRA specified that it would cease applying the new capital gains inclusion rate.
Other Measures Not Yet Approved
Below is a non-exhaustive list of other measures announced by the federal government in its 2024 budget that had not yet received Royal Assent at the time of Parliament’s prorogation:
-
Incentive for Canadian entrepreneurs;
-
Increase in the capital gains exemption from $1,016,836 to $1,250,000;
-
Introduction or modification of certain clean energy tax credits;
-
Strengthening of the Scientific Research and Experimental Development (SR&ED) program;
-
Extension of the loss carryforward period for estates subject to taxation at progressive rates.
For more information on the tax impacts of the Canadian Parliament’s prorogation, please contact your FBL representative.
https://www.ledevoir.com/economie/830164/changements-gain-capital-sont-maintenus-moment