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Your business, your retirement: increases to capital gains taxes may be coming

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Like all the rest of your fellow Canadians, you should be able to plan for a secure retirement. For a small business owner, that means having the assurance that you can easily transfer your business to the next generation of entrepreneurs. Because you probably don’t already have access to a pension plan, you may be counting on the proceeds from the sale of your business to see you through your golden years.

Currently, when you sell your business, 50% of the proceeds are subject to the capital gains tax - this percentage is known as the inclusion rate. The federal government may be considering increasing the inclusion rate from 50% to 60% or 75%.

What are the impacts for small biz?

Increasing the inclusion rate would reduce the amount that a small business owner receives from the sale of their business, directly affecting your retirement income. As a result, some small business owners may have to delay their retirement, or forgo it entirely!

How is CFIB working for you?

We have sent a letter to the Finance Minister, Bill Morneau, strongly urging the federal government not to move forward with any changes to the inclusion rate. Instead, we are recommending that they focus on policies that would make it easier for small business owners to enjoy a secure retirement, including:

  • Strengthening the Lifetime Capital Gains Exemption (LCGE) by increasing it to $1 million for small businesses in all sectors;
  • Include business-related assets in the LCGE, as they offer a better representation of the overall value of the business;
  • Allow all SMEs to defer capital gains taxes when transferring their business to a family member, as farmers and fishers are currently able to do; and,
  • Pass legislation that would enable small business owners to sell their business to family members at no greater cost than to a non-related third party.

 

Come find out more about CFIB’s past work on succession planning and what it means for you.

We are also offering information, including a free webinar, on what you can do to build a succession plan for your business.

If you have questions, contact a CFIB Business Counsellor at [email protected] or by telephone at 1 888-234-2232.