If your BC company is sitting on an appreciated asset — a building, a portfolio of marketable securities, goodwill on an impending sale — you have likely heard that the rules on capital gains may be about to change, and that the change could take effect on June 25, 2024, just weeks from now. Federal Budget 2024 proposed raising the capital gains inclusion rate, and the proposal has a deadline attached. That combination — a tax increase with a near-term effective date — is exactly the kind of thing that drives rushed decisions. The right response is neither panic nor inaction. It is to understand what is actually proposed, what is still uncertain, and how to think about timing without making an irreversible move on the strength of a measure that has not yet been enacted.
Let me be precise about the date of this writing. As of early June 2024, this is a proposal. The relevant legislation has not been finalized. Nothing here should be read as predicting the outcome; it is a guide to planning around uncertainty.
What did Budget 2024 propose?
Budget 2024 proposed to increase the capital gains inclusion rate — the portion of a capital gain that is included in taxable income — as follows:
- From one-half (50%) to two-thirds (about 66.67%) of the gain.
- For corporations and trusts, the higher inclusion rate would apply to all capital gains.
- For individuals, the one-half rate would be retained on the first $250,000 of net capital gains realized in a year, with the two-thirds rate applying only to the portion above $250,000.
- The change would apply to capital gains realized on or after June 25, 2024.
Alongside this, the budget proposed to increase the Lifetime Capital Gains Exemption (LCGE) on qualifying small business corporation shares and qualifying farm or fishing property — from roughly $1,016,836 to $1.25 million — for dispositions on or after June 25, 2024, with future indexing.
The key asymmetry for incorporated BC owners: a corporation gets no $250,000 annual buffer. Every dollar of a corporation's capital gain would move from 50% to two-thirds inclusion under the proposal. That is why the impact lands differently on a gain realized inside your company versus personally.
Why the corporate-versus-personal distinction matters
For an individual realizing a modest gain, the proposal may change nothing: gains up to $250,000 a year stay at the 50% rate. For a corporation, there is no such floor. If your operating company or holding company realizes a large gain — selling a property, crystallizing a securities position — the entire gain would be included at two-thirds rather than one-half.
This affects more than the immediate tax bill. Corporate capital gains feed the capital dividend account (CDA), the mechanism that lets the non-taxable portion of a corporate capital gain flow out to shareholders tax-free. A higher inclusion rate means a smaller non-taxable portion, and therefore a smaller CDA addition per dollar of gain. The downstream effect on how efficiently you can extract proceeds is real and deserves modelling.
A worked example: Scenario A (before) vs Scenario B (after)
Consider Lions Gate Holdings Ltd., a BC corporation planning to sell a commercial property with a $1,000,000 capital gain. Compare a disposition that closes before June 25, 2024, against one that closes after, under the proposal. (BC's general corporate rate is used illustratively at roughly 27% on the taxable portion; your effective rate should be modelled precisely.)
Scenario A — Gain realized before June 25, 2024 (50% inclusion):
- Taxable capital gain: $1,000,000 × 50% = $500,000
- Corporate tax at ~27%: $135,000
- Non-taxable portion to CDA: $500,000
Scenario B — Gain realized on/after June 25, 2024 (two-thirds inclusion, as proposed):
- Taxable capital gain: $1,000,000 × 66.67% = $666,700
- Corporate tax at ~27%: $180,000
- Non-taxable portion to CDA: $333,300
The difference: roughly $45,000 more corporate tax on the same $1,000,000 gain, plus about $166,700 less flowing into the CDA for tax-free extraction. On a single transaction, that is a material number — enough to make timing worth examining, but not so automatic that you should crash a sale through before it is ready.
The judgment call: should you accelerate a gain?
Here is where discipline matters. The proposal creates an obvious temptation: realize gains before June 25 to lock in the 50% rate. Sometimes that is the right move. Often it is not. Weigh these honestly:
- Is the disposition real and ready? Accelerating a sale you were going to make anyway, on good terms, to beat a tax increase can be sound. Manufacturing a disposition you did not want — selling to yourself, triggering a gain with no genuine economic exit — can backfire and may attract scrutiny.
- It is a proposal, not law. A measure with a June 25 effective date can still be modified, delayed, or not proceed as drafted. Acting irreversibly on an unfinalized rule carries its own risk. (Indeed, the eventual fate of this particular proposal would unfold over the following months — but as of this writing, it is unsettled, and I will not pretend to know the outcome.)
- Transaction costs and after-tax proceeds. A rushed sale often means a worse price, higher advisory and legal costs, and less negotiating leverage. Saving tax while losing more on price is a poor trade.
- The LCGE side. If you are selling qualifying small business corporation shares, the proposed higher LCGE of $1.25 million (for dispositions on or after June 25) could shelter more of your gain — a factor that can point the other way on timing for a share sale.
The sound posture for most BC owners in early June 2024 is: model both scenarios, keep genuine, ready transactions on schedule, and avoid irreversible moves made purely to beat a proposal that has not been enacted.
What to do this month
- Inventory unrealized gains in your corporation and personally — what could be triggered, and what is the approximate gain.
- Model before/after for any disposition you are genuinely contemplating, including the corporate tax, CDA, and personal extraction effects.
- Check LCGE eligibility if a share sale is in view; the proposed $1.25M exemption may change the calculus.
- Distinguish real transactions from artificial ones. Time genuine deals thoughtfully; do not invent dispositions to chase a rate.
- Coordinate with your tax advisor before June 25 on anything time-sensitive, and document your reasoning either way.
- Verify status against current CRA and Department of Finance guidance, because a proposal can change.
Key takeaways
- Budget 2024 proposed raising the capital gains inclusion rate from one-half to two-thirds, effective for gains realized on or after June 25, 2024.
- For corporations and trusts the higher rate would apply to all gains; individuals keep the 50% rate on the first $250,000 per year.
- A corporation has no $250,000 buffer — and a higher inclusion rate also shrinks the capital dividend account, reducing tax-free extraction.
- The proposed LCGE increase to $1.25M could shelter more of a qualifying share sale.
- This is a proposal, not enacted law as of June 2024 — model both scenarios, keep genuine deals on schedule, and avoid irreversible moves made solely to beat the date.
When a tax change is still a proposal, the wisest move is usually to be ready for either outcome rather than bet everything on one.
Sitting on an appreciated asset and unsure whether to act before June 25? RN Canada provides fractional CFO and tax advisory support to established BC companies — let us model the before-and-after on your actual numbers before you decide.