How do you plan a year-end when one of the biggest variables — the capital gains inclusion rate — is still unsettled? For British Columbia corporations with a 31 December year-end, the 2024 planning season carries an unusual amount of ambiguity. The federal government proposed raising the capital gains inclusion rate to two-thirds effective 25 June 2024, the Canada Revenue Agency is administering the change, but it has not yet been enacted into law as the autumn closes. Layer on the first year of the new CPP2 payroll cost and a falling-rate environment, and the firms that plan deliberately this December will be meaningfully better off than those that wait. This post lays out the moves that make sense now, and how to handle the parts that are still in flux.
Where do the capital gains rules actually stand right now?
As of this writing, the position is genuinely uncertain, and it is important to describe it honestly. The 2024 federal budget proposed increasing the capital gains inclusion rate from one-half to two-thirds — on gains above $250,000 annually for individuals, and on all capital gains realized by corporations and most trusts — with a stated effective date of 25 June 2024. The CRA has indicated it will administer the proposed change. However, the measure has not yet been enacted by Parliament; it remains a proposal supported by draft legislative detail rather than law in force.
The same budget measure proposed raising the Lifetime Capital Gains Exemption to $1.25 million from roughly $1.02 million on qualifying small-business shares and farm or fishing property.
What this means for planning: you must avoid two opposite mistakes. Do not assume the increase is law and trigger gains reactively to "beat" it, because it has not been enacted and could still change. Equally, do not assume it will disappear and ignore it entirely, because the CRA is administering it as proposed. The prudent posture is to model both outcomes for any material disposition, and to make irreversible decisions only with current professional advice on the legislative status at the moment you act.
What should you do about a planned disposition this year?
If your corporation is contemplating selling an asset, a property, or shares that would realize a significant capital gain, the inclusion-rate uncertainty changes how you sequence the decision rather than whether you make it.
For a genuine commercial transaction that makes sense on its own terms, proceed — but model the tax outcome under both a one-half and a two-thirds corporate inclusion rate so you know your range of after-tax proceeds and can reserve enough for the liability. For a discretionary crystallization driven only by tax timing, exercise real caution: triggering a gain purely to lock in a rate that is not yet law is a bet, not a plan. Where the disposition involves qualifying small-business shares, the enhanced LCGE is a far more reliable lever than the inclusion-rate timing, and should be the first thing examined.
The new cost in the room: CPP2 and owner remuneration
2024 is the first year of the second additional CPP contribution, CPP2, and it changes the salary-versus-dividend arithmetic at the margin. CPP2 applies a 4% contribution from both employee and employer on earnings between the year's maximum pensionable earnings of $68,500 and the new second ceiling of $73,200 for 2024 — a maximum additional cost of $188 each for employer and employee, or $376 for a self-employed owner taking salary, on top of base CPP.
For owner-managers, this raises the total payroll cost of salary slightly and is one more input into the perennial salary-versus-dividend decision. It does not, on its own, tip most owners toward dividends — salary still creates RRSP room, builds CPP entitlement, and is deductible to the corporation — but it should be costed explicitly rather than ignored.
A worked example: timing owner pay around CPP2 and the small-business limit
Consider the sole shareholder of a Nanaimo-based professional corporation with about $300,000 of pre-remuneration income, deciding how to pay herself for 2024.
Scenario A — flat salary, no year-end review. She pays herself a $150,000 salary as in prior years without revisiting the mix. The salary is fully deductible to the corporation, but she now incurs the new CPP2 cost — an extra $188 of employee contribution and $188 of employer contribution — and the corporation's remaining income is taxed at the BC small-business rate. The plan is fine but unexamined.
Scenario B — a deliberate year-end remuneration review. She runs the salary-versus-dividend split with her advisor before 31 December. The analysis confirms keeping a salary large enough to maximize RRSP room and CPP entitlement, but tops up the rest of her cash needs with eligible dividends rather than additional salary — avoiding further employer CPP/CPP2 on the incremental amount while keeping enough corporate income within the small-business limit. She also accelerates a planned bonus accrual into the current year, deductible now and payable within 179 days, to manage the corporation's income against the small-business threshold. The net effect is a modestly lower combined tax-and-payroll cost and better-positioned RRSP and CPP outcomes — not from any aggressive position, but from running the numbers before the year closed rather than after.
The point is not that dividends beat salary, or the reverse. It is that the introduction of CPP2 makes 2024 a year to actually re-run the calculation rather than repeat last year's split out of habit.
What standard year-end moves still apply?
The capital gains noise should not distract you from the reliable corporate year-end levers that work every year:
- Capital cost allowance timing. Assets purchased and available for use before year-end can generate CCA for the current year. With rates now falling, some equipment purchases shelved during the high-rate period may also clear their investment case again — a tax and a financing reason to act.
- Bonus accruals. A bonus accrued at year-end and paid within 179 days is deductible in the current year, a classic tool for managing income against the small-business limit.
- Salary-versus-dividend optimization. Re-run it this year specifically because of CPP2, as above.
- Prepay deductible expenses where it makes commercial sense and the timing genuinely accelerates the deduction.
- Review the small-business deduction position, including any grind from passive investment income, before committing to the remuneration mix.
- Confirm instalments and the balance-due date for your year-end so you are not caught by arrears interest in a still-elevated-rate environment.
Key takeaways
- The capital gains inclusion-rate increase is proposed and being administered by the CRA but not yet enacted as 2024 closes — model both a one-half and a two-thirds outcome on any material disposition, and avoid reactive crystallization for a rate that is not law.
- The enhanced $1.25M Lifetime Capital Gains Exemption on qualifying small-business shares is a more reliable lever than inclusion-rate timing — examine it first.
- 2024 is the first CPP2 year (4% on earnings from $68,500 to $73,200; up to $188 each side) — re-run your salary-versus-dividend split rather than repeating last year's.
- The dependable levers still apply: CCA timing, bonus accruals, prepaid deductions, and the small-business-limit review before 31 December.
- With rates falling, some shelved capital purchases now make sense on both tax and financing grounds.
In an uncertain year, the disciplined move is not to guess where the law will land — it is to plan so you are well-positioned whichever way it goes. Certainty is a luxury this year-end does not offer; preparation is the substitute, and it is the better one.
If you would like your 2024 year-end modelled under both capital gains scenarios, with the CPP2 cost and your owner-pay mix properly optimized, RN Canada can run it before the deadline closes your options. We act as a fractional CFO partner to established BC corporations — reach out and let us help you plan through the uncertainty.