This article explains the 2026 federal budget proposals most likely to matter to business owners, entrepreneurs, professionals and individuals. Click here to download our comprehensive Federal Budget commentary.

On November 5, 2026, the federal government released Budget 2026 (the “Budget”), proposing a broad package of tax simplification, investment incentives and targeted administrative changes. The measures summarized below are proposals and may be amended before enactment.

The Budget does not change personal or corporate income tax rates. Instead, it focuses on helping businesses invest and grow, simplifying filing and payment rules, and offering more targeted GST/HST relief.

Key Takeaways

• Business investment. The full cost of eligible equipment, software and research assets acquired on or after September 15, 2026, could be deducted immediately.
• Selling shares. A new Canada Growth Incentive would exempt up to $15 million of capital gains per qualifying individual, per qualifying business, on qualifying newly issued CCPC shares. Significant eligibility conditions and industry exclusions apply. The small-business rollover would also become more flexible from January 1, 2027.
• Corporate and international matters. Changes affect group loss sharing, preferred shares, trusts with non-resident owners and property transfers to a corporation.
• Filing and GST/HST. From 2027, individuals would file and pay personal income taxes by May 15. Reporting limits rise, but many penalties increase. Massage therapy becomes GST/HST-exempt, so clinics stop charging the GST/HST and lose related input tax credits.
• Planning still matters. Many measures have conditions and future start dates.

Corporate and Owner-Managed Business Measures

Investment and Innovation Incentives

The Productivity Mega Deduction would allow businesses to deduct the full cost of eligible machinery, equipment, software, and research and development property right away if acquired on or after September 15, 2026. Prior to making a major capital expenditure, the item’s eligibility and the date of acquisition should be confirmed.

The Scientific Research and Experimental Development (SR&ED) program would also expand for taxation years beginning on or after November 5, 2026, to cover certain regulatory tests, technology validations, commercialization studies and intellectual property costs. What this means for a business: Equipment and commercialization costs should be tracked early, as their classification can affect deductions and tax credits.

Canada Growth Incentive for Qualifying Share Sales

The proposed Canada Growth Incentive would allow a qualifying individual to claim an exemption for up to $15 million of capital gains realized on qualifying shares of a qualifying corporation. The $15-million limit would apply separately to each qualifying individual and each business.

The individual would generally have to:

• be at least 18 years old when the shares were acquired;
• be a resident in Canada throughout the year in which the exemption is claimed;
• own shares issued directly to the individual or to a partnership of which the individual was a member; and
• acquire the shares for cash or in exchange for employment services.

The corporation would generally need to be a Canadian-controlled private corporation when the shares are issued, and the combined carrying value of the corporation and related corporations could not exceed $100 million immediately before and after issuance. The corporation’s assets would also need to be used principally in a qualifying business, with at least 50% of asset value attributable to such a business throughout the individual’s ownership period. The business would generally need to be carried on primarily in Canada for at least 24 consecutive months subsequent to the share issuance, and the shares would need to be held for at least 36 consecutive months before disposition.

The proposal excludes numerous businesses, including professional practices, consulting businesses, agriculture, fishing, forestry, mining, financial services, insurance, utilities, real estate, food and accommodation, arts, recreation, entertainment and businesses operated under licensing or franchising arrangements. The exemption would also interact with the Lifetime Capital Gains Exemption, and gains sheltered by the new exemption would be subject to a 30% inclusion rate for alternative minimum tax purposes. Additional integrity rules are expected to address the multiplication of exemption through multiple corporations carrying on the same underlying business.

Small-Business Rollover and Group Loss Planning

The Budget proposes significant enhancements to the existing Eligible Small Business Corporation (ESBC) capital gains rollover when the shares of an ESBC are sold and shares of another ESBC are acquired:

1. Extended reinvestment period: Investors would have until the end of the third calendar year following disposition to reinvest proceeds in qualifying ESBC shares, rather than just the following year.
2. Additional two years for future equity agreements: Where an investor enters into a qualifying agreement, the reinvestment period could extend to five years.
3. Relaxed active business asset test: During the ownership period, the requirement would decrease from approximately 90% of assets used in active business to more than 50%. However, the approximately 90% threshold would still apply at share issuance and disposition.
4. Capital gains deferral: Qualifying gains could be deferred through a reserve mechanism during the replacement period. Interest would apply to deferred gains attributable to proceeds not ultimately reinvested.

These rules are applicable on qualifying share dispositions occurring on or after January 1, 2027.

Please note that these particular rules represent a capital gains deferral, not an exemption, and generally apply to individual investors rather than corporate shareholders. For owner-managed businesses, the expanded reinvestment window and relaxed asset test could dramatically improve the feasibility of taking advantage of the small business rollover rules, although the other ESBC eligibility requirements remain relevant.

The government is also seeking feedback on an optional way to transfer losses within wholly owned corporate groups. Currently, there is no draft legislation in this regard Until details are released, existing loss-sharing strategies should continue to be used.

Payments, Penalties and Foreign Property Reporting

GST/HST Change for Massage Therapy

Qualifying massage therapy services provided after November 5, 2026, would become GST/HST-exempt. Patients would not pay the tax, but clinics would generally lose the ability to recover GST/HST paid on related expenses. Pricing, prepaid packages and registration should be reviewed before billing practices are changed.

Personal Tax Measures

A Common May 15 Filing and Payment Deadline

Starting with the 2027 tax year, all individuals, including the self-employed, would have a single personal income tax filing and payment deadline of May 15. For 2026 returns, current deadlines still apply: April 30, 2027, for most individuals and June 15, 2027, for the self-employed. Any balance owing is generally still due April 30.

Simplified Deductions, Credits and Reporting

Beginning with the 2027 tax year, an individual would be able to claim flat amounts, for certain items, instead of tracking actual expenses: $1,000 for moving, $1,500 for labour mobility, $1,000 for home accessibility and $1,200 per adopted child, amongst other available deductions. Medical expense paperwork would also be reduced. Actual expenses could still be claimed if that provides for a better income tax result.

In addition, the Canada Caregiver Credit would become refundable for 2027 and later years.

Retirement, Estate and Owner-Manager Planning

The government is seeking feedback on an “RRSP for life,” which would remove the requirement to convert an RRSP to a RRIF at age 71, though minimum yearly withdrawals would still apply. Comments are due by January 8, 2027.

Broader rules for individual pension plans (IPPs) would start January 1, 2027, with new rules on prohibited investments, non-qualified investments and excess surplus in 2028. Where an IPP exists, its investments and funding level should be reviewed.

New rules would limit tax-deferred family trust distributions that pass-through corporations or partnerships with non-resident owners. Planned distributions should be reviewed before any transaction is completed on or after November 5, 2026.

Other Personal Measures to Note

• The farm and fishing property rollover would extend to certain nieces, nephews, grandnieces and grandnephews for transfers on or after January 1, 2027.
• The deadline to dispute most tax assessments would generally increase from 90 days to one year, but the current process for asking for a late-filing extension would be removed.
• An enhanced Build Canada Workers Benefit and a one-time Canada Groceries and Essentials Benefit supplement are proposed for lower-income individuals and families.

What Business Owners Should Consider Now

• Planned 2026 and 2027 capital expenditures should be reviewed for eligibility for an immediate deduction.
• New share issuances and financing should be reviewed before the Canada Growth Incentive is relied upon.
• The proposed new deadlines should be noted, but current rules continue to apply until the changes become law.
• Foreign property reporting (the higher limits apply to individuals, corporations, trusts and certain partnerships), family trust distributions and any IPP investments should be reviewed.
• Massage therapy businesses should estimate the impact of losing input tax credits before changing prices.

Final Thoughts

Budget 2026 combines investment incentives with simpler tax administration and targeted GST/HST relief. For private businesses, the key questions are when to invest in equipment, whether shares qualify for the Canada Growth Incentive, and how corporate groups, trusts and cross-border transactions are affected. For individuals, the proposed changes to filing, instalments, objections and foreign-property reporting could reduce paperwork, but start dates vary. Many measures are still proposals. Before transactions are completed or filing practices are changed, the final legislation and CRA guidance should be confirmed with your tax advisor.

How Bateman MacKay Can Help

For customized advice on how Budget 2026 may affect your business, investment structure, tax compliance or personal planning, please reach out to your Bateman MacKay Business Advisor. Topical accounting, tax and business advisory articles can be accessed by subscribing to the Bateman MacKay blog and following Bateman MacKay on LinkedIn.