Explaining the 2024 Budget: Tax Changes for Canadian Businesses
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10 Jul 2024
The 2024 Canadian federal budget has brought some important changes in the taxation system. Many types of businesses will be impacted by it.
Some of these changes will surely affect startups, small and medium-sized businesses (SMBs), non-profit organizations, franchise businesses, and family-owned businesses, among others.
What are these changes? Should you schedule a meeting with your chartered professional accountant after reading the blog?
Let’s find out!
For any of these businesses operating in British Columbia, we provide a free first consultation with a Chartered Professional Accountant BC. Read below to find out if your business has any of these structures:
Budget 2024 has brought both challenges and opportunities for many business types. It's crucial to find out the tax changes, their specific impact, and tax strategies that could work for dealing with the changes in the new tax routine.
Remember, this blog offers only a general overview. For more specific and accurate information, consult a tax professional who will give you advice suitable for your unique issues.
You can also get in touch with Corporate Planning & Compliance Canada firm CJCPA for all your tax planning, saving, and credits claiming issues. It also helps businesses with recordkeeping & accounting and stays on every step of the way if they face a CRA audit. For more details, you can schedule a free consultation, and discuss the issues facing your business.
What are the key changes introduced in Budget 2024?
To get a broader description of these changes, check out our previous blogs that explain these latest measures in detail.- Capital Gains Tax: The biggest shift revolves around capital gains tax. Previously, only half of capital gains were included in taxable income. Budget 2024 introduces a tiered system:
- Gains under $250,000 for individuals remain subject to the 50% inclusion rate.
- Gains exceeding $250,000 for individuals and all capital gains for corporations and trusts now face a 66.67% inclusion rate (increased from 50%).
- Lifetime Capital Gains Exemption (LCGE): The LCGE, which exempts a portion of capital gains on qualified small business corporation shares and certain properties, has been increased to $1.25 million (from $1,016,836). However, indexation to inflation is paused until 2026.
- Canadian Entrepreneurs' Incentive (CEI): To encourage investment and growth, the budget introduces the CEI. This offers a reduced capital gains tax rate (50% inclusion) on up to $2 million of qualifying lifetime capital gains for eligible individuals. The $2 million limit will be phased in gradually over the next decade.
How will the budget 2024 in Canada impact different business types?
For any of these businesses operating in British Columbia, we provide a free first consultation with a Chartered Professional Accountant BC. Read below to find out if your business has any of these structures:
- Startups & SMBs: Given the hike in capital gains tax on larger sales, it might discourage some exits. However, note that the CEI provides a silver lining for the founder, who has significant ownership of the business. We advise you to structure the ownership and exit with a strategy that will maximize your CEI benefit.
- Non-Profits: Of course, nonprofits don’t have to pay income tax. However, unrelated business income tax (UBIT) may apply to some of the activities of your nonprofit. There are minor changes in UBI calculations proposed in the budget for 2024.
- Franchise Businesses: Typically, these are independent businesses, but the franchisor may hold the IP rights. Here, the change in capital gains would impact sales in the franchise.
- Family-Owned Businesses: Budget 2024 does offer some relief with the LCGE. With this, businesses can transfer large portions of business to their family members through tax-free transfers. Explore different succession strategies to take advantage.
Tax planning strategies you can implement
Below are some basic tax planning strategies that could help you take advantage of the budget 2024 measures in Canada. Many Corporate Tax filing Canada firms often recommend these techniques to business owners:- Firstly, review the capital gains potential. You must assess your business's potential for capital gains in the future. It can help determine the impact of the new tax rates, and you’ll plan accordingly.
- Secondly, consider your business structure. If there is an optimal business structure in place, it can influence tax implications. Find out if you have to restructure your business for maximum benefit under the new tax regime.
- Third, maximize deductions and credits. Canadian businesses have many tax credits and rebates available to them. Utilize these to minimize your taxable income, especially if you face higher capital gains taxes.
- Finally, seek professional advice. Consult a qualified tax adviser to understand the complexities of the new tax landscape and develop a personalized tax plan for your specific business.
Wrapping it up!
Budget 2024 has brought both challenges and opportunities for many business types. It's crucial to find out the tax changes, their specific impact, and tax strategies that could work for dealing with the changes in the new tax routine.
Remember, this blog offers only a general overview. For more specific and accurate information, consult a tax professional who will give you advice suitable for your unique issues.
You can also get in touch with Corporate Planning & Compliance Canada firm CJCPA for all your tax planning, saving, and credits claiming issues. It also helps businesses with recordkeeping & accounting and stays on every step of the way if they face a CRA audit. For more details, you can schedule a free consultation, and discuss the issues facing your business. 
