The Canada Revenue Agency (CRA) says it will be moving forward with the proposed capital gains tax increase despite the amendment not yet being made a law.
The CRA’s statement came in the wake of Justin Trudeau’s resignation as Prime Minister on Monday, an announcement that has left several tabled bills with uncertain futures.
During Trudeau’s resignation announcement, he explained that the Governor General had agreed to prorogue Parliament until March 24 while the Liberal Party chose a new leader. This decision, however, cuts close to tax season. In fact, corporations and trusts are required to file by March 3, before Parliament resumes.
For the time being, anyone filing will be required to abide by the capital gains tax increase proposed on June 25. The tabled proposal increases the capital gains inclusion rate from 50 per cent to 66 per cent on any capital gains over $250,000 realized on or after June 25, 2024. This means any cottagers who’ve sold or passed on their properties since the end of June will be required to pay more tax.
As Cottage Life editor-in-chief Michelle Kelly pointed out in an op-ed last year, the increased tax targets the one per cent, but it could have unintended consequences for middle- or working-class cottagers, specifically those hoping to pass their property on to the next generation. If families are unable to afford the tax, they may have to sell. The capital gains tax only applies to secondary residences, such as cottages, not primary residences.
The CRA said that it is parliamentary convention to put proposed taxation into effect—even if it’s not yet passed into law—as long as the government has tabled a Notice of Ways and Means Motion, which it did on September 23. “This approach provides consistency and fairness in the treatment of all taxpayers,” the agency said in a statement.
The CRA will issue the forms required to file under the new capital gains’ rules by January 31.
Parliament will need to finalize the bill once it resumes in late March. If, however, the bill isn’t passed—either because the Liberals have a change of heart or an election happens and a new party comes to power—the CRA says it would cease to administer the new capital gains’ rules
“Upon resumption of Parliament, if no bill is passed in the House of Commons, and the government signals its intent to not proceed with the proposed measures, the CRA will be ready to support taxpayers in ensuring any corrective reassessments of implicated returns are processed,” the agency said.
While it can be painstaking to wait on a CRA refund, gambling on whether the bill will pass and refusing to file under the new rules could result in interest on the amount owing, plus financial penalties.
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