3 big questions about how the capital gains tax increase affects you
The federal government’s decision to increase the capital gains tax rate to 66.7 per cent from 50 per cent has caused a lot of angst amongst business owners, professionals, investors and property owners, to name just a few.
But confusion still reigns about who these changes will affect and how. Neil Kumar, an adviser and portfolio manager at Richardson Wealth, answers three big questions about the increase.
“The federal government cites figures indicating that only a small percentage of taxpayers will be subject to the increased capital gains inclusion rate. In reality, a much wider spectrum of Canadians will be impacted by the changes, ranging from professionals and small-business owners/entrepreneurs to those who may own a second property.
“In general, any Canadian who has a trust or incorporated business (holding company) will see a significant increase in their taxes. Working professionals who are allowed to incorporate (for example, accountants, lawyers, doctors and realtors) and small-business owners will see the inclusion rate on capital gains rise by 33 per cent after June 25.
“In terms of numbers, according to the Government of Canada’s own stats, there were 1.19 million small-business owners as of December 2022 and these business owners employed roughly 46.8 per cent of the total private labour force. In addition to small-business owners, there are more than 210,000 accountants, 136,000 lawyers, 96,000 physicians and 160,000 realtors in Canada, many of whom have a holding company to invest their excess savings.
“In other words, the government’s figure of 0.13 per cent is grossly low. Individuals who invest through a holding company will also see a decrease in the amount going to their capital dividend account
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