Interest Relief on the Increase in Capital Gains Tax

In June 2024, the Canadian government announced a significant change to the capital gains inclusion rate, increasing it from 50% to 66.67%. This adjustment applies to corporations and trusts, as well as individuals with annual capital gains exceeding $250,000. Effective June 25, 2024, this measure is aimed at generating additional revenue for public initiatives.

However, the Canada Revenue Agency (CRA) has acknowledged challenges in implementing the necessary system updates to accommodate the new inclusion rate. To address this, the CRA is offering temporary relief from arrears interest and penalties for corporations and trusts with filing deadlines on or before March 3, 2025. This interest relief gives taxpayers additional time to adjust to the new requirements without incurring financial penalties.

How to Leverage the Interest Relief
Taxpayers affected by the increase in the capital gains inclusion rate should consider delaying additional tax payments until closer to the March 2025 deadline. Here’s why:

  • Maximize Investment Earnings: Retaining funds until closer to the deadline can create opportunities for reinvestment or other financial gains.
  • Optimize Tax Strategies: The added time allows you to consult with Clearline CPA to explore strategies that minimize tax liability, such as offsetting gains with losses or restructuring investments.
  • Ensure Compliance: The CRA’s interest relief reduces the urgency to make immediate payments, providing a smoother transition to the new inclusion rate without penalties.

Key Considerations
While the interest relief offers flexibility, it’s essential to keep a few points in mind:

  • Ensure you have sufficient funds set aside to cover tax obligations when they become due.
  • The interest relief applies only to arrears related to the increased inclusion rate. Other aspects of your tax filings must remain accurate and timely to avoid unrelated penalties.
  • If you’re directly impacted by this change, discuss your tax remittance strategy with your Clearline CPA representative to ensure you’re making the most informed decisions.
    Plan Ahead with Clearline CPA

This temporary relief period offers a unique opportunity to optimize your financial planning and tax strategy. Contact Clearline CPA to discuss how we can help you navigate these changes, maximize opportunities, and stay compliant.