Budget 2026 contains a capital-gains proposal that looks far larger than Canada’s familiar small-business deduction, but it is also much narrower. The proposed Canada Growth Incentive would exempt up to $15 million of gains on qualifying shares for each eligible Canadian-resident individual in respect of each business. That is not an exemption for every entrepreneur who sells a company. Eligibility depends on what shares were issued, when, to whom and by which kind of business.
The Department of Finance’s supplementary tax measures, published with the November 5 budget, specify that eligible shares generally must be issued on or after Budget Day and before 2037. The proposed rules therefore invite an immediate review of new financing, not a retroactive assumption about old founder stock. The measure remains proposed; advisors should not describe it as enacted or guaranteed.
A $15-Million Ceiling With Multiple Doors to Pass Through
The shareholder must generally be an individual, not a trust, at least 18 when acquiring qualifying shares and resident in Canada in the year of the claim. Direct acquisition from the issuing company matters. The shares must be newly issued for cash or certain employment services, with continuity rules contemplated for later reorganizations.
At issuance, the company must be a Canadian-controlled private corporation. The combined carrying value of assets of that corporation and related corporations must not exceed $100 million immediately before and after the share issue. Broad asset tests apply during ownership, and the qualified business must be carried on primarily in Canada for at least 24 consecutive months after issuance. The shareholder generally needs 36 consecutive months of ownership immediately before disposition.
The sector exclusions are consequential for a Canadian advisor book. Consulting and specified professional practices are outside the proposed qualifying businesses, as are agriculture, forestry, mining, finance, insurance, utilities, real estate, accommodation, arts, recreation and entertainment, among others. A founder in an excluded industry cannot simply read the $15-million maximum and attach it to their sale forecast.
Zero Ordinary Inclusion Does Not Mean Zero Tax Exposure
The second condition is a separate tax calculation. Finance proposes that a gain exempted under the Canada Growth Incentive would still be included at 30% for alternative minimum tax purposes. It also proposes interactions that can restrict using the Lifetime Capital Gains Exemption on shares of the same corporation. The extra detail means two identical headline gains can produce different after-tax outcomes.
The chart below separates three concepts for a hypothetical gain entirely eligible for the proposed exemption. At the current ordinary 50% capital-gains inclusion rate, a $15-million gain would create $7.5 million of regular taxable capital gain without this relief. Under the proposed incentive, regular taxable inclusion on that eligible gain would be zero. For the alternative minimum tax calculation, 30% of the exempt gain, or $4.5 million, would enter the relevant AMT base before other AMT adjustments. That figure is not an AMT bill.
Sixteen modeled gain amounts from $0 million to $15 million, not historical observations. The zero regular-tax inclusion applies only if every legal CGI condition is met and legislation is enacted. The grey 30% curve is an AMT inclusion base, not actual AMT owing; exemptions, deductions, credits and other income can affect liability.
Why the Issuance Date Changes the Planning Conversation
The policy is designed to encourage new risk capital. A secondary purchase of shares from another owner is fundamentally different from subscribing for new shares from a company. A corporation that would satisfy an operational test today might not have satisfied it when shares were issued, and a later sale may fall short of the holding period. Each failure can defeat an otherwise attractive projection.
The government has also signalled further integrity rules to prevent multiplying the $15-million limit through multiple corporations operating the same underlying business. Those rules were not fully released with the budget. That is a reason for documentation and professional review, not a reason to assume that a complex holding structure has been blessed.
For advisors, the immediate deliverable is a share register and eligibility memo: issuance date, original consideration, shareholder residency, related-company assets, business category, operating history, likely sale horizon, other exemption claims and AMT sensitivity. If the client is raising capital now, coordinate the questions before the term sheet is finalized. An attractive proposed ceiling can be valuable, but only a legally qualifying asset can reach it.