Budget 2026: Founder capital gains and reinvestment
Budget 2026 proposes a new Canada Growth Incentive capital gains exemption of up to $15 million per individual for each business, limited to qualifying shares issued on or after Budget Day and before 2037. It also proposes a longer reinvestment window for the existing small business rollover, with a path of up to five years for SAFEs, and a looser active-business asset test. The budget text cited here does not describe a change to the Lifetime Capital Gains Exemption holding period.
New $15 million exemption per business
A new exemption of up to $15 million per qualifying individual for each business, covering qualifying shares issued in a defined window, with conditions on share type, holding period, company size and sector.
Sources
Budget 2026 proposes to introduce a new Canada Growth Incentive (CGI) capital gains exemption which would allow a Canadian-resident individual to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15-million limit. This $15 million would apply separately to each qualifying individual in respect of each business.
Budget 2026 - Masters of our Destiny · PDF p. 396Full cited page
Budget 2026 proposes to introduce a new Canada Growth Incentive (CGI) capital gains exemption which would allow a Canadian-resident individual to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15-million limit. This $15 million would apply separately to each qualifying individual in respect of each business.
This measure would apply in respect of qualifying shares of a qualifying corporation issued on or after Budget Day and before 2037.
Budget 2026 - Masters of our Destiny · PDF p. 398Full cited page
This measure would apply in respect of qualifying shares of a qualifying corporation issued on or after Budget Day and before 2037.
The share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation.
Budget 2026 - Masters of our Destiny · PDF p. 396Full cited page
The share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation.
For a minimum period of 36 consecutive months immediately before the disposition, the share must have been held by the qualifying individual or the partnership of which the qualifying individual was a member.
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
For a minimum period of 36 consecutive months immediately before the disposition, the share must have been held by the qualifying individual or the partnership of which the qualifying individual was a member.
Immediately before and after the share’s issuance, the combined carrying value of the assets of the corporation and all corporations related to it must not exceed $100 million.
Budget 2026 - Masters of our Destiny · PDF p. 396Full cited page
Immediately before and after the share’s issuance, the combined carrying value of the assets of the corporation and all corporations related to it must not exceed $100 million.
a business providing consulting services, a professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer, architect, and any business whose principal asset is the reputation or skill of one or more employees;
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
a business providing consulting services, a professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer, architect, and any business whose principal asset is the reputation or skill of one or more employees;
a business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation, or entertainment sectors; and
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
a business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation, or entertainment sectors; and
a business operating under a licensing or franchising agreement.
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
a business operating under a licensing or franchising agreement.
Additional rules will be proposed to prevent individuals from accessing the CGI exemption in circumstances that do not align with the intent of the measure, including the multiplication of the exemption limit through the use of multiple corporations that carry on the same underlying business. Details of these rules will be released at a later date.
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
Additional rules will be proposed to prevent individuals from accessing the CGI exemption in circumstances that do not align with the intent of the measure, including the multiplication of the exemption limit through the use of multiple corporations that carry on the same underlying business. Details of these rules will be released at a later date.
Interaction with existing exemption and AMT
Claiming either exemption on the same corporation limits the other, and exempted gains carry a 30 per cent AMT inclusion rate.
Sources
Capital gains exempted through this measure would be subject to an inclusion rate of 30 per cent for the purposes of the AMT, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption.
Budget 2026 - Masters of our Destiny · PDF p. 397Full cited page
Capital gains exempted through this measure would be subject to an inclusion rate of 30 per cent for the purposes of the AMT, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption.
A CGI exemption claimed on qualifying shares of a qualifying corporation would limit the ability of a qualifying individual to claim the Lifetime Capital Gains Exemption for a sale of shares of the same corporation. Similarly, a Lifetime Capital Gains Exemption claimed on the sale of shares of a corporation would limit the ability of a qualifying individual to claim the CGI exemption on the sale of shares of that same corporation.
Budget 2026 - Masters of our Destiny · PDF p. 398Full cited page
A CGI exemption claimed on qualifying shares of a qualifying corporation would limit the ability of a qualifying individual to claim the Lifetime Capital Gains Exemption for a sale of shares of the same corporation. Similarly, a Lifetime Capital Gains Exemption claimed on the sale of shares of a corporation would limit the ability of a qualifying individual to claim the CGI exemption on the sale of shares of that same corporation.
Small business rollover changes
A longer replacement period, a SAFE pathway to five years, and a looser active-business asset test during ownership, effective for dispositions from January 1, 2027.
Sources
First, the period to acquire replacement shares would be extended to encompass the year of disposition and the three following calendar years.
Budget 2026 - Masters of our Destiny · PDF p. 398Full cited page
First, the period to acquire replacement shares would be extended to encompass the year of disposition and the three following calendar years.
Second, an individual who, before the end of the proposed three-year replacement period, enters into an agreement with an ESBC under which the investor provides upfront capital in return for shares to be issued at a future date (e.g., a simple agreement for future equity or SAFE), would be able to defer the capital gain for an additional two years, for a total replacement period of up to five years.
Budget 2026 - Masters of our Destiny · PDF p. 399Full cited page
Second, an individual who, before the end of the proposed three-year replacement period, enters into an agreement with an ESBC under which the investor provides upfront capital in return for shares to be issued at a future date (e.g., a simple agreement for future equity or SAFE), would be able to defer the capital gain for an additional two years, for a total replacement period of up to five years.
These measures would apply to qualifying dispositions that occur on or after January 1, 2027.
Budget 2026 - Masters of our Destiny · PDF p. 399Full cited page
These measures would apply to qualifying dispositions that occur on or after January 1, 2027.
Budget 2026 proposes to lower the threshold from “all or substantially all” to “primarily” for the active business requirement’s asset test that must be met throughout the period during which the individual owned the shares. However, the “all or substantially all” threshold would need to be met at the time of issuance and disposition of the shares.
Budget 2026 - Masters of our Destiny · PDF p. 399Full cited page
Budget 2026 proposes to lower the threshold from “all or substantially all” to “primarily” for the active business requirement’s asset test that must be met throughout the period during which the individual owned the shares. However, the “all or substantially all” threshold would need to be met at the time of issuance and disposition of the shares.
Analysis of cited budget provisions. Proposals and forecasts are distinguished from implemented measures.
