Canada Growth Incentive: what Budget 2026 proposes
The federal budget tabled on November 5, 2026 proposes the Canada Growth Incentive (CGI): a new capital gains exemption of up to $15 million per person, per business, on the sale of qualifying shares of a growing Canadian company. It would apply to qualifying shares issued on or after Budget Day (November 5, 2026) and before 2037. The same package also proposes a longer reinvestment window for the existing small business investment rollover, for dispositions on or after January 1, 2027.
The CGI is aimed at founders, early employees and investors who put cash or work into a Canadian-controlled private corporation (CCPC) early. It is separate from the lifetime capital gains exemption (LCGE), which stays at $1.25 million.
Status: this is a budget proposal, not law. As of November 9, 2026 no bill to implement it has been passed. Parliament must pass the legislation and it must receive Royal Assent, and the government says further integrity rules, including limits on using multiple corporations, will be released later. The details below come from the Budget 2026 tax measures: supplementary information annex and can change before they are enacted.
Canada Growth Incentive at a glance
| Item | Proposed rule |
|---|---|
| Exemption limit | Up to $15 million of capital gains, per qualifying individual, per business |
| Shares that count | Issued on or after November 5, 2026 and before 2037 |
| Who can claim | An individual (not a trust), at least 18 when the share was acquired, resident in Canada in the year the exemption is claimed |
| How the share must be acquired | Issued directly by the corporation to the individual (or a partnership the individual belongs to), solely for cash or for the individual's employment services |
| Corporation at issuance | A CCPC; substantially all asset value relates to a qualifying business carried on primarily in Canada; assets of the corporation and related corporations not more than $100 million immediately before and after the issuance |
| Minimum holding period | 36 consecutive months before the sale |
| While the shares are held | At least 50% of asset value relates to a qualifying business throughout; the business is carried on primarily in Canada for the first 24 consecutive months after issuance |
| Corporation at sale | Canadian-resident, and either private or public and listed on a designated Canadian exchange; substantially all asset value used principally in a qualifying business |
| Alternative minimum tax | Exempt gains use a 30% inclusion rate for AMT, the same as LCGE gains |
| Status | Proposed in Budget 2026; not yet law |
Which businesses qualify, and which do not
A qualifying business is an active business. The budget excludes these, even when they are run through a CCPC:
- Consulting and professional practices, for example accountants, lawyers, physicians and engineers, and any business whose main asset is the reputation or skill of an employee
- Agriculture, fishing, forestry and mining
- Finance and insurance, utilities and real estate
- Food and accommodation, and arts, recreation and entertainment
- Businesses operated under a licensing or franchising agreement
In practice the CGI is built for scaling companies such as technology, manufacturing and other product businesses. A restaurant franchise, a rental property company or a consulting firm would not qualify, though its owners may still have access to the LCGE.
Canada Growth Incentive vs the lifetime capital gains exemption
The two exemptions cover different situations and can interact on the same company's shares.
| Canada Growth Incentive (proposed) | Lifetime capital gains exemption (current law) | |
|---|---|---|
| Limit | Up to $15 million per individual, per business | $1.25 million per individual, lifetime, for dispositions after June 24, 2024 (indexed to inflation) |
| Shares | Newly issued for cash or employment services, on or after November 5, 2026 and before 2037 | Qualified small business corporation shares, however acquired |
| Holding period | 36 consecutive months | Not owned by anyone other than the individual or a related person for the 24 months before the sale |
| Asset test while held | At least 50% of asset value in a qualifying business | More than 50% of asset value in an active business carried on primarily in Canada, over the 24 months before the sale |
| Size limit | $100 million of assets (with related corporations) at issuance | No asset size cap |
| Excluded industries | Yes, see the list above | No industry exclusions |
| Status | Proposed | In force |
Under the proposal, claiming the CGI on a corporation's shares limits your LCGE on shares of that same corporation, and an LCGE claim on that corporation's shares limits the CGI. The budget says the CGI can generally be used alongside the exemption for a sale to an employee ownership trust or worker cooperative. The current LCGE limit and its inflation indexing are set out on the CRA's line 25400 capital gains deduction page.
The small business investment rollover changes
The second half of the Canada Growth Incentive expands the existing rollover that lets an individual defer a capital gain on eligible small business corporation shares by reinvesting the proceeds in replacement shares.
| Feature | Budget 2026 proposal |
|---|---|
| Replacement period | The year of disposition plus the three following calendar years |
| Deferral while you look for a reinvestment | A reserve defers the gain to the next year, until the replacement period ends |
| Future-equity agreements (such as a SAFE) | If signed with an eligible small business corporation inside the three-year period, two more years, up to five in total; if no shares are issued by the end of year five, the deferred gain is taxed |
| Interest | Prescribed-rate interest on proceeds not reinvested, from the balance-due day for the year of disposition until the gain is taxed |
| Active asset test while held | Eased from "all or substantially all" to "primarily"; "all or substantially all" still applies at issuance and at disposition |
| Canadian activity | Business carried on primarily in Canada at issuance and for the lesser of two years and the ownership period |
| Effective | Qualifying dispositions on or after January 1, 2027 |
Edge cases to watch
Shares issued before November 5, 2026
They do not qualify for the CGI. Only shares issued on or after Budget Day count, so an existing founder's shares are outside the new exemption. A new share issuance for cash after Budget Day could qualify if every other test is met.
Shares bought from another shareholder
The share has to be issued by the corporation directly to you (or to a partnership you are a member of). Buying shares on a secondary sale from another shareholder does not meet that test.
Employees paid in shares
Shares issued in exchange for your employment services are covered, so an early employee could qualify. The holding period, asset tests and the excluded-business list still apply.
Growing past $100 million
The $100 million asset limit, counting related corporations, is tested immediately before and after each issuance. A company that is above the line when it issues new shares cannot issue qualifying shares at that point, but shares issued earlier keep their status if the ongoing tests are met.
Going public
At the time of sale the corporation may be private, or public and listed on a designated Canadian exchange. A listing outside Canada is not in the proposed text.
Several businesses, several limits
The $15 million limit applies per individual, per business. The government has said integrity rules will stop the exemption being multiplied through several corporations that carry on the same business.
Alternative minimum tax
A large exempt gain is not entirely free of AMT. As with the LCGE, 30% of the exempt gain is included when the AMT is calculated, so a year with a large claim should be modelled before the sale.
What business owners and investors should do now
- Do not plan on it as law yet. Wait for the draft legislation and the integrity rules before structuring a transaction around the CGI.
- Record how and when shares are issued. The issuance date, the consideration (cash or services), the shareholder's age and residency, and the corporation's asset values at issuance all matter. Keep share registers, subscription agreements and balance sheets from the issuance date.
- Check the industry exclusions first. If your business is a professional practice, real estate, franchise or another excluded activity, the LCGE is the exemption to plan around.
- Track the asset mix. Surplus cash and passive investments held in the company can put the 50% and "substantially all" asset tests at risk.
- Plan the sale year. Model the AMT, and coordinate any CGI claim with the LCGE if shares of the same corporation are involved.
For how capital gains are taxed generally, see our capital gains tax in Canada guide. Budget 2026 also proposes a single May 15 personal tax deadline, covered in Tax deadline May 15. If you are thinking about an eventual exit, our post on preparing a business for sale covers the groundwork. RN Canada prepares personal and corporate tax returns and helps owners plan transactions; contact us to talk through your situation.
Canada Growth Incentive FAQ
Is the Canada Growth Incentive law?
No. It was proposed in Budget 2026 on November 5, 2026. It becomes law only once Parliament passes the implementing legislation and it receives Royal Assent.
How much is the Canada Growth Incentive exemption?
Up to $15 million of capital gains per qualifying individual, per business, on qualifying shares held for at least 36 consecutive months.
Does it replace the lifetime capital gains exemption?
No. The LCGE remains at $1.25 million. Using one exemption on a corporation's shares limits the other on shares of that same corporation.
Can accountants, lawyers or consultants use it?
No. Consulting and professional practices, and businesses whose main asset is an employee's reputation or skill, are excluded from the definition of a qualifying business.
When does the expanded rollover start?
For qualifying dispositions on or after January 1, 2027, if the proposal is enacted.
Sources: Budget 2026 tax measures: supplementary information (Department of Finance Canada); Budget 2026 key measures (Department of Finance Canada, November 5, 2026); Income Tax Act s. 110.6; CRA line 25400 capital gains deduction. Figures as of November 9, 2026. This article is general information, not tax advice for your situation.