Posted on 06/25/2024 11:41:38 AM PDT by nickcarraway
Capital gains changes have Canadians rushing to get ‘affairs in order’
Canadians are scrambling to get their “affairs in order” as controversial changes to how capital gains are taxed are set to go into effect on Tuesday, accountants say.
The changes, which have received pushback from business groups and doctors, will increase the inclusion rate for taxable capital gains from 50 to 67 per cent for individuals realizing more than $250,000 in capital gains annually.
Even though the proposal was first introduced in Budget 2024 in April, more details on the changes only became clear on June 10 when the Liberals put a motion to implement them up for a vote in the House of Commons – which approved it.
In advance of the changes kicking in on June 25, John Oakey, vice-president of taxation at Chartered Professional Accountants of Canada, said accountants have seen an influx of clients, with a lot of transactions being made over a “very intensive” last couple of weeks.
“I talked to a number of CPAs of accounting firms, as well as lawyers that have been frantically in the last about two weeks — since the notice of ways and means motion came out — frantically trying to help clients get their affairs in order and determine if they want to do any tax planning or not,” Oakey said in an interview with Global News on Monday.
“So, there is a lot of work going on right now and in the two weeks when the details came out up to the June 25 deadline,” he said, adding that some transactions might not be completed because there isn’t enough time left.
Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth, said that in the past week alone he was personally involved in at least five client meetings and four presentations on this topic.
“We’ve really been absolutely overwhelmed,” Golombek told Global News on Monday.
Financial news and insights delivered to your email every Saturday. “There are some people scrambling to close transactions on the sale of either, let’s say, a private company or real estate trying to get those closed today, on Monday, so that the gain will settle in a period where the inclusion rate is 50 per cent,” he said.
As for people trying to sell publicly traded shares, “it’s pretty late at this point” to do anything as the trade deadline was on Friday and it has to settle on Monday, he said.
What is changing?
Capital gains are the proceeds from the sale of an asset like a stock or an investment property.
All capital gains come with an inclusion rate, meaning a percentage of profits realized from the sale is added to taxable income in that year.
Under the new changes, that inclusion rate would rise to 67 per cent from 50 per cent on any gains realized above $250,000 annually for individuals.
That two-thirds inclusion rate would apply to all such gains made by corporations and many trusts.
However, Canadians’ principal residences would remain exempt from capital gains taxes.
Click to play video: 'How capital gains tax changes impact family cottages' 1:44 How capital gains tax changes impact family cottages
Effective June 25, there is also a new $250,000 annual threshold to ensure individuals earning modest capital gains continue to benefit from the current 50 per cent inclusion rate, according to the finance department.
“For the average Canadian, this probably has no effect whatsoever, because the average Canadian doesn’t realize $250,000 of capital gains every year,” Golombek said.
The government has said this will only affect a very small, typically wealthy segment – 0.13 per cent of Canadians.
But Oakey said this measure will probably impact more individuals than originally proposed because different people obtain large capital gains typically as a one-time event each year.
“It’s almost like a revolving door with regards to people with large capital gains, that it doesn’t seem to be the same individuals year over year recognizing large capital gains,” he said.
Next steps after tax hike Once the measures do kick in, Oakey said he is anticipating the changes to run into “technical errors,” which could create “unintended consequences.”
“When you change the inclusion rate and you add this $250,000 threshold, it fundamentally changes a lot of provisions in the Income Tax Act, which the system is extremely complex as it is and this adds another extreme level of complexity to it,” he said.
Some strategies that investors are now considering are tax gain realization at the end of year by looking at their portfolio and selling winners so that they can stay under the $250,000 gain threshold and realize some gains on an annual basis, Golombek said.
“Every year towards the end of the year where if you haven’t used up your $250,000 capital gain at a low rate, you might want to look at your portfolio and say, ‘Hey, are there some winners here?’” he said.
Similar planning might also be done in terms of the estate if people are worried about the debt on death, where they may want to start realizing some of the capital gains on an annual basis as they get older rather than face that large tax, Golombek said.
They are being obliterated right before their eyes at warp speed, and keep taking it! White people are terminally stupid
The SCOTUS ruling yesterday is a harbinger of what is headed for us.
I'd lean more towards sighting in at 200 yards.
Under the new changes, that inclusion rate would rise to 67 per cent from 50 per cent on any gains realized above $250,000 annually for individuals.
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So they print money, and inflate everything (to above $250K).
Then the resulting gains are taxed at 2/3.
So then they get back most of the phoney inflated money.
So I have sold my asset. And the gain is mostly gone. And gasoline, et.al. are still unafordable.
I should have had an economics class.
Oh, I did, but back then it made sense.
Which ruling?
The only saving grace to that is the fact that congress makes so much of their wealth through stocks and capital gains...it would seriously impact them as well.....unless they somehow carved themselves out of a tax increase to capital gains or some weird crap in taxing unrealized capital gains.
I think carving themselves out of a tax liability that the rest for the nation would have would hopefully get smacked down from the scotus.
Thats what everyone sights in at.....and the Army sights in at 300...so you better make it 400.
Canada is ruled by a fascist government that uses the monarchy as its ultimate tool for beating down Canadias with socialism.
CAnadians are somnolent serfs. They cannot even get tyhe courage to epect politiicians who are for a reduction of firears control.Cowards.
Alberta is the only Canadian Province where people actually fight for their freedom.
Didn’t Trudeau lose a seat a couple of days ago ?
Have you been to Canada or are you repeating what you have seen on right wing blogs and media? There is an incentive to exaggerate claims that make countries that have leftist governments into something worse than they are.
As a Canadian, I can assure you that Candor 7 is almost dead-on in the assessment of an appalling number of my fellow citizens.
“Then the resulting gains are taxed at 2/3.”
The resulting gains are not taxed at 2/3.
Bon Chance, mon ami.
taxable capital gains from 50 to 67 per cent for individuals realizing more than $250,000 in capital gains annually.
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Well, I was calculating that 67 per cent is 2/3.
But I will use your numbers.
and the Army sights in at 300...so you better make it 400.
= = =
Well, 67% inflation would move 300 yds out to 500 yards.
MORE MONEY! MORE MONEY! The government hog screams as he gobbles everything in sight and turns it into shit.
Will Poillivere (sp) win?
It is wholly dependent on how Ontario and Quebec vote. The ROC (rest of Canada) is just along for the ride most of the time, it’s Toronto and Montreal that decide our nation’s direction most of the time.
Kiss investments goodbye.
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