Federal Budget 2026

Budget 2026 highlights

Note: There were no changes in personal tax rates in this budget.

1. Measures concerning individuals

The budget proposes:

• Changing the T1 filing and balance due deadlines to May 15
• Changes to instalment payments for individuals and corporations 
• For Registered Disability Savings Plans – making the measure permanent that qualified family members can open and hold the plan  
• To increase the thresholds for which some individuals and others must file the Foreign Income Verification Statement (Form T1135)

2. Measures regarding businesses

The budget proposes:

• A new Canada Growth Incentive (CGI) capital gains exemption on up to $15 million on successful eligible investments
• Expansion of the intergenerational farm and fishing property tax deferral of capital gains to include additional family members

3. Other measures

The budget proposes:

• Launching of Canada’s first national sovereign wealth fund: The Canada Strong Fund (CSF)
• To make Individual Pension Plans (IPPs) subject to the same anti-avoidance rules as other registered plans
• Proposal to merge the core features of the RRSP and RRIF and to make other changes to harmonize the RRSP tax rules to eliminate the need for individuals to convert their RRSP to a RRIF at age 71

Here is a summary of the 2026–2027 federal budget speech delivered by the Minister of Finance, the Honourable François-Philippe Champagne, on November 5th, 2026. 

To help you understand how the 2026–2027 budget affects individuals and businesses financially, our Tax, Retirement and Estate Planning Team has provided this analysis of key measures affecting individuals and businesses.

Measures concerning individuals

Income tax return filing and balance-due dates for individuals

Budget 2026 proposes to change the T1 filing and balance-due dates to May 15 for all individuals, including self-employed individuals and their spouses or common-law partners.

These measures would apply to the 2027 and subsequent taxation years.

Instalment payments for individuals and corporations

Most individuals pay taxes through withholdings on their employment income that are remitted to the Canada Revenue Agency (CRA) by their employers. However, where an individual receives income from sources that aren’t subject to withholding (e.g., certain sources of pension income, business income, dividends, interest, rental income and capital gains), they may have to pay income tax in quarterly instalments. For most individuals, instalments are required if their combined federal and provincial net tax owing on income from such sources for the current year and either of the two previous years is more than $3,000 (or $1,800 federal net tax owing for Quebec residents). 

Corporations generally must make monthly or quarterly tax instalment payments in respect of their federal tax liability unless their total federal tax payable is $3,000 or less for either the current or previous year.

Budget 2026 proposes to increase the threshold from $3,000 to $7,500 for corporations and individuals resident outside Quebec, and from $1,800 to $4,500 for individuals resident in Quebec. The thresholds would be indexed to inflation and rounded to the nearest $500. Any remaining tax payable for a taxation year would be due on the applicable balance-due date.

This measure would apply to taxation years that begin on or after January 1, 2028.

Registered Disability Savings Plan

The Registered Disability Savings Plan (RDSP) is a tax-assisted savings plan designed to support the long-term financial security of a beneficiary who is eligible for the Disability Tax Credit. 

Generally, an adult beneficiary is the holder of their own RDSP. Where they don’t have contractual capacity due to a mental impairment, the plan holder must be a legal representative who is authorized under provincial or territorial law to act on the individual’s behalf. If the individual doesn’t have a legal representative, but after reasonable inquiry, it’s the opinion of the RDSP issuer that the individual’s contractual capacity to enter into a plan is in doubt, a temporary measure is in place up to the end of 2026 to allow a qualifying family member of the individual to open an RDSP and be the plan holder. A qualifying family member may be a parent, spouse or common-law partner, or sibling.

Budget 2026 proposes to make the qualifying family member measure permanent.

Foreign Income Verification Statement – Form T1135

Canadian-resident individuals, corporations and trusts, as well as certain partnerships, must file a Foreign Income Verification Statement (Form T1135) with the CRA if they own specified foreign property with a total cost of more than $100,000 at any time in a taxation year or fiscal period. 

Form T1135 provides a simplified reporting method if the total cost of a taxpayer’s specified foreign property is less than $250,000 throughout the year.

Budget 2026 proposes to increase the threshold above which Form T1135 must be filed from $100,000 to $200,000. The CRA would also increase the threshold for simplified reporting from less than $250,000 to less than $500,000.

These measures would apply to taxation years or fiscal periods that end after 2026.

Measures regarding businesses

Canada Growth Incentive – Capital gains exemption

Budget 2026 proposes to introduce a new Canada Growth Incentive (CGI) capital gains exemption which would allow a Canadian-resident individual to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15 million limit. This $15 million would apply separately to each qualifying individual in respect of each business.

Qualifying individual

A qualifying individual would have to be an individual other than a trust and be at least 18 years old at the time they acquired a qualifying share. The individual would have to be resident in Canada throughout the year in which they claimed the exemption. The claim could relate to a capital gain realized on the disposition of a qualifying share in that year or a preceding taxation year.

A qualifying share would have to be issued by a qualifying corporation to the qualifying individual (or a partnership of which the qualifying individual is a member) and owned directly by the qualifying individual or by the partnership. Where a partnership acquired a qualifying share, at the time that the partnership acquired the share, the qualifying individual would have to have been a member of the partnership and at least 18 years old.

Qualifying shares

A share of the capital stock of a corporation would be a qualifying share of a qualifying corporation if the following conditions were met.

At the time of share issuance:

• The corporation must be a Canadian-controlled private corporation; and
• All or substantially all of the fair market value of the corporation’s assets must be attributable to assets used, or reasonably intended to be used within 36 months, principally in a qualifying business carried on primarily in Canada.

Immediately before and after the share’s issuance, the combined carrying value of the assets of the corporation and all corporations related to it must not exceed $100 million.

The share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation. Continuity rules would be proposed to accommodate certain share-for-share exchanges and other corporate reorganizations that could occur after qualifying shares have been issued.

Throughout the period during which the qualifying individual or a partnership of which the qualifying individual is a member owned the qualifying share, 50% or more of the fair market value of the corporation’s assets must be attributable to assets used, or reasonably intended to be used, principally in a qualifying business. Further, for a minimum period of 24 consecutive months immediately following share issuance, the qualifying business would be required to be carried on primarily in Canada.

• For a minimum period of 36 consecutive months immediately before the disposition, the share must have been held by the qualifying individual or the partnership of which the qualifying individual was a member.
• At the time of disposition:
  • the corporation must be a Canadian-resident corporation that is either a private corporation or a public corporation listed on a designated stock exchange located in Canada, and
  • all or substantially all of the fair market value of the corporation’s assets must be attributable to assets used principally in a qualifying business.

 

Qualifying business

A qualifying business would be an active business other than:

• a business providing consulting services; a professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer, or architect; and any business whose principal asset is the reputation or skill of one or more employ
• a business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation, or entertainment sectors; and
• a business operating under a licensing or franchising agreement.

Integrity rules

Additional rules will be proposed to prevent individuals from accessing the CGI exemption in circumstances that don’t align with the intent of the measure, including the multiplication of the exemption limit through the use of multiple corporations that carry on the same underlying business.

Details of these rules will be released at a later date.

Alternative minimum tax (AMT)

Capital gains exempted through this measure would be subject to an inclusion rate of 30% for the purposes of the AMT, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption (LCGE).

Interaction with other capital gains exemptions

A CGI exemption claimed on qualifying shares of a qualifying corporation would limit the ability of a qualifying individual to claim the LCGE for a sale of shares of the same corporation. Similarly, an LCGE claimed on the sale of shares of a corporation would limit the ability of a qualifying individual to claim the CGI exemption on the sale of shares of that same corporation.

A qualifying individual could generally claim both the capital gains exemption on a sale to an Employee Ownership Trust or a worker cooperative and the CGI exemption on the same sale of shares, with the use of one exemption having no impact on the limit available under the other exemption.

Coming into force

This measure would apply in respect of qualifying shares of a qualifying corporation issued on or after Budget Day 2026 and before 2037.

Expansion of the intergenerational farm and fishing property rollover

The Income Tax Act allows for a tax deferral (“rollover”) of capital gains on intergenerational transfers of certain farming property and fishing property from a taxpayer to the taxpayer’s child or the child’s spouse or common-law partner. For these purposes, a child includes the taxpayer’s grandchild or great-grandchild.

Budget 2026 proposes to expand the rollover so that it’s available for transfers to a niece, nephew, grandniece or grandnephew of the taxpayer or the taxpayer’s spouse or common-law partner.

This measure would be effective for transfers that occur on or after January 1, 2027.

Other measures

Canada Strong Fund (CSF)

The government is launching Canada’s first national sovereign wealth fund: The Canada Strong Fund (CSF).

The CSF will invest in Canadian companies and projects, giving Canadians a direct equity stake in Canada’s growth agenda and allowing them to share in the returns of these investments. The CSF will ensure that all Canadians have the opportunity to participate in Canada’s economic growth and long-term prosperity.

The CSF will provide Canadians the opportunity to benefit directly from its activities through a retail investment product. Through this product, Canadians can get direct exposure to assets such as infrastructure or venture capital widely used by institutional investors such as pension funds, and can invest some of their savings to directly support Canada’s growth and resilience agenda, if they choose.

The government plans to offer a CSF-linked principal-protected note (PPN) that would have the following features:

• accessibility and simplicity: Canadians will be able to easily purchase, hold and redeem a CSF investment product;
• principal protection: the investment product will provide downside protection ensuring that investors’ principal is protected; and
• upside participation: as the CSF succeeds, investors will be able to share in the upside.
• Canadians would be able to purchase this product through participating financial institutions.
• the product would have defined maturities (e.g., five years, seven years, ten years) and a base coupon rate.

Investors would be guaranteed that the principal of their investment remains protected at maturity and receive higher returns subject to the performance of the CSF. As the CSF earns positive investment returns, investors will receive a share of those returns through periodic interest payments and an enhanced value at maturity.

The CSF will work with the financial sector to develop key design features of the retail product that are important to Canadians, such as distribution channels and redemption rights, with a view to launching the product in early 2027.

Individual Pension Plans (IPP)

An individual pension plan (IPP) is a defined benefit registered pension plan (RPP) that has fewer than four members, at least one of whom is related to an employer that participates in the plan (e.g., a controlling shareholder). IPPs provide businesses with a mechanism to provide pension benefits to owner-managers in respect of their employment.

Excessive Surplus

When the assets of an RPP exceed 125 per cent of its pension liabilities, the tax rules require that participating employers take contribution holidays until the RPP’s surplus falls below that threshold. Broad-membership RPPs generally absorb excess surplus by a combination of contribution holidays and ongoing growth in pension benefit liabilities.

Some IPPs have modest or no ongoing contributions and relatively stable liabilities. As a result, asset growth can result in excessive surplus that is not needed to satisfy pension benefits. The current rules do not require this surplus to be withdrawn, and income earned from such surplus is tax sheltered while held in the IPP.

Budget 2026 proposes to impose a new condition that an IPP must satisfy to maintain its RPP registration. If the value of an IPP’s assets exceeds 200 per cent of its pension liabilities, the plan would become a “revocable plan” for RPP registration purposes. The CRA is required to issue a notice of intent to revoke at least 30 days prior to issuing a revocation letter. This would provide the plan administrator with time to take steps (such as withdrawing excess amounts) to comply with the registration condition and thus no longer be in a revocable position.

If the plan’s registration were ultimately revoked by the CRA, the same tax consequences of becoming a revoked plan, as described above, would apply.

This measure would apply as of January 1, 2028.

Registered Retirement Savings Plan (RRSP)

Budget 2026 announces the government’s intention to merge the core features of the RRSP and Registered Retirement Income Fund (RRIF) under the Income Tax Act into a single “RRSP for life” and to make other changes to improve and modernize the RRSP tax rules. This would eliminate the need for individuals to convert their RRSP to a RRIF at age 71.

Individuals over the age of 71 would continue to be required to make minimum withdrawals.

The specific issues under consideration include the following:

• Whether and how the RRSP rules could include a “successor holder” (i.e., a spouse or common law partner) feature similar to other registered vehicles. This could permit an RRSP to remain open until the death of the successor holder (i.e., the original holder’s surviving spouse or partner) and avoid the value of RRSP property being included in the income of the deceased.
• Whether and how the current RRSP indirect “rollover” provisions that apply on death (involving an income inclusion and offsetting deduction for a qualifying survivor) could be replaced with rules to permit direct tax-free transfers to qualified registered vehicles of qualifying survivors.

Under provincial and federal pension standards, funds transferred from a pension plan are generally subject to locking-in restrictions until retirement and may be required to be held in prescribed vehicles, such as a locked-in RRIF or RRSP. As a result, merging the RRSP and RRIF rules could require consequential changes to the federal Pension Benefits Standards Regulations, 1985, and similar provincial legislation.

Consultation

The government is seeking Canadians’ views on this proposal. Interested parties are invited to send written representations to the Department of Finance Canada at RRSP-consultation-REER@fin.gc.ca by January 8, 2027.

For more information

To find out more about the 2026-2027 Federal Budget, visit https://budget.canada.ca/2026/report-rapport/toc-tdm-en.html.

Information and opinions contained in this commentary is intended as general information and has been compiled from sources believed to be reliable but no representation or warranty, express or implied, is made with respect to their timeliness, accuracy or completeness, and SLGI Asset Management Inc. disclaims any responsibility for any loss that may arise as a result of its use. Views contained in the commentary are subject to change without notice and are provided in good faith without legal responsibility. The commentary is not intended to provide specific financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard and does not constitute a specific offer to buy and/or sell securities. The words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are not guarantees of future events or performance and are speculative in nature and cannot be relied upon.

Please speak with your financial advisor or tax specialist, and refer to the Budget as published by the Government of Canada for details before acting on any of the information contain in this commentary.

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