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Planning for succession: a huge win in the fight against unfair tax laws

Update, July 2021: Great news! After many years of fighting for fairer tax treatment of small businesses, we’re thrilled to announce that it is now easier for you to transfer your business to a family member. Bill C-208 has been passed by Parliament and received Royal Assent. The bill establishes the same tax treatment whether you sell your business to a family member or to a stranger - so you don’t have to pay a higher tax bill just for keeping it in the family. 

This is the culmination of years of efforts by CFIB and our members, who have signed petitions, answered our surveys and written to MPs to stop this unfair tax treatment of family businesses.

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Whether you’ve just started your first business or your doors have been open for a long time, succession planning should be an essential part of your overall business plan.

Unlike many salaried employees, you don’t have access to a pension plan, which means that you’ll probably have to rely on the sale of your business to see you through your golden years. Thanks to Bill C-208, passed in summer 2021, you will no longer have to decide between a more generous retirement and your children’s future. 

CFIB has fought to ensure that you’re able to successfully plan for retirement, and that you have the necessary tools and resources at your disposal.

Lifetime Capital Gains Exemption: More money for your future

After 15 years of advocacy, CFIB was able to win the initial Lifetime Capital Gains Exemption (LCGE) in 1987. The LCGE applies to qualified small business shares and exempts you from being taxed on some or all of the gain when you sell or transfer your business. This means that you are able to keep more of the proceeds from the sale or transfer of your business. Learn more about the LCGE.

Since then, we’ve kept the fight going:

  • In 1994, we stopped the government from eliminating the LCGE altogether.
  • We secured increases to the LCGE in 2008 and 2014. The government agreed to an increase for farmers and fishers in 2015.
  • In 2015, the exemption was indexed to inflation. For farmers and fishers, it is $1,000,000.
  • In 2021, the exemption is valued at $ 892,218.
  • We fought against the government’s proposed tax changes that would have made it harder for you and your family to access the LCGE.

Now, we’re asking the government to increase the LCGE to $1,000,000 for all small businesses and expand it to include some assets, allowing more small companies to benefit from this measure.

Passing down your business to the next generation

For years, if you sold your business to a family member, the difference between the sale price and the price originally paid was considered a dividend. But if you sold to an unrelated person, it was considered a capital gain—and your taxes were lower. Business owners were effectively penalized for keeping their business in the family. 

What we asked for

We have been asking for years to make it easier to sell family businesses to family members. MPs from all parties have worked to make this happen in the past, including Liberal MP Emmanuel Dubourg and NDP MP Guy Caron, and we supported their proposals. Now, Bill C-208 from Conservative MP Larry Maguire has made it through Parliament, accomplishing what CFIB and our members have been demanding for years.

Bill C-208 will amend the tax act so that most intergenerational transfers of businesses will be treated more fairly and will now get the same tax treatment as if they sold to a third party.

Start planning your retirement!

While you may be years away from even thinking about retirement, it’s still important that you have a solid plan in place! Find out more about how to build a succession plan or chat directly with your CFIB business counsellor.

Since these are complex measures, we recommend talking with your financial planner when you’re ready to put your own succession plan together so that they help walk you through the steps.

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Topics in this Article: Taxes

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