Despite the recent prorogation of Parliament, the Canada Revenue Agency (CRA) will proceed with administering proposed changes to the capital gains tax, according to a statement from the Department of Finance.
The department clarified that, as per standard practice, the CRA is implementing the adjustments to the capital gains inclusion rate effective June 25, 2024. This follows the government’s notice of ways and means motion tabled on September 23, 2024.
“Although these changes require parliamentary approval, the CRA is administering them to ensure consistency and fairness for all taxpayers,” a Department of Finance official stated.
CRA Filing Updates
The CRA has already indicated that updated forms for filing these proposed changes will be available by January 31, 2025. Additionally, corporations and trusts impacted by these measures with filing deadlines on or before March 3, 2025, will receive penalty and arrears interest relief.
However, the department emphasized that the CRA’s role in administering proposed legislation remains guided by parliamentary outcomes. If Parliament does not pass the legislation and the government opts not to move forward, the CRA will halt the administration of these measures.
Implications of a Potential Spring Election
With speculation around a possible spring election and a potential change in government, the fate of the proposed capital gains tax changes remains uncertain. A lack of parliamentary approval could delay or entirely cancel the implementation of these measures.
Navigating Audit and Filing Risks
Tax professionals have weighed in on how taxpayers should approach this evolving situation. As highlighted by Kim Moody in the Financial Post, the CRA’s income tax audit manual specifies that taxpayers cannot be compelled to file under proposed legislation unless it benefits them.
Taxpayers are instead advised to comply with enacted legislation following royal assent, acknowledging the possibility of interest on any amounts owed under finalized rules.
Evelyn Jacks, president and CEO of Knowledge Bureau, provided additional guidance in a recent LinkedIn post. She recommended a cautious approach for this tax season:
“Taxpayers should calculate capital gains taxes under the proposed rules but be prepared to request a refund if the changes are officially withdrawn,” Jacks advised.
Moving Forward
The Department of Finance’s statement underscores the CRA’s mandate to maintain consistency and fairness during legislative transitions. Still, taxpayers and advisors must stay vigilant as political developments could significantly impact the proposed measures.
For now, taxpayers should proceed with caution and consult with professionals to minimize risks while staying compliant with current and evolving regulations.
