Federal Budget 2026 and Tariff Support Programs
November 9, 2026
Sector:
Nov 9, 2026
Overview
Federal Budget 2026 was tabled on November 5, 2026. There are no changes to personal or corporate income tax rates. Instead, the budget focuses on three things that matter to owner-managed businesses: rewarding investment in growing Canadian companies, expanding R&D and capital-investment incentives, and simplifying how individuals and corporations file and pay tax.
The headline for our clients is the new Canada Growth Incentive, a capital gains exemption of up to $15 million on qualifying shares. Several practical changes follow it: a new May 15 personal filing deadline, higher instalment thresholds, a doubled T1135 threshold, and a longer window to object to a CRA assessment.
These are proposals. Most measures still need legislation before they become law, and some have consultation periods running into January 2027.
Separately from the budget, two federal programs are helping tariff-affected businesses right now: FedDev Ontario’s Regional Tariff Response Initiative (RTRI) and BDC’s Pivot to Grow financing. We cover both at the end of this bulletin.
The Canada Growth Incentive
The Canada Growth Incentive (CGI) is the budget’s main entrepreneurship measure. It has two parts: a new capital gains exemption, and a more flexible rollover for reinvesting sale proceeds into another small business.
Part 1: up to $15 million capital gains exemption
Founders, key employees and outside investors could exempt up to $15 million of capital gains on the sale of qualifying shares of an eligible Canadian company. The limit applies per individual, per business.
| Condition | What the budget proposes |
|---|---|
| Who can claim | Canadian-resident individuals (not trusts), at least 18 when the shares were acquired |
| Which shares | Shares newly issued from treasury on or after November 5, 2026 and before 2037; existing shares do not qualify |
| Holding period | At least 36 months immediately before the sale |
| Company size | Combined assets of no more than $100 million when the shares are issued |
| Active business | 50% or more of asset value used principally in a qualifying business while held; all or substantially all at the time of sale |
| Canadian operations | Business carried on primarily in Canada for 24 consecutive months after issuance |
| Interaction with LCGE | Cannot claim both the CGI and the Lifetime Capital Gains Exemption on shares of the same corporation |
Excluded businesses are significant for many of our clients. They include consulting and professional practices (accounting, law, medicine, engineering, architecture), any business whose main asset is the skill or reputation of its people, franchises and licensed businesses, and businesses in agriculture, fishing, forestry, mining, finance, insurance, utilities, real estate, food and accommodation, arts, recreation and entertainment.
In practice, the CGI is aimed at growth-stage companies in sectors such as technology, manufacturing and advanced services. Finance has said more anti-avoidance rules are coming to stop people multiplying the exemption.
Part 2: an expanded small business rollover
Today, you can defer a capital gain on shares of an eligible small business corporation if you reinvest the proceeds in another one within a short window. For sales on or after January 1, 2027, the budget proposes to:
- extend the reinvestment window to the year of sale plus the following three calendar years
- allow up to five years where you fund a company upfront through a SAFE (simple agreement for future equity)
- relax the active-business test from “all or substantially all” to “primarily”
What this means for you
If you own or are raising money for a growth company, the timing and form of new share issuances now matter. Shares issued before November 5, 2026 do not qualify, and the company will need records showing it met the asset and activity tests throughout. If you are planning a sale, talk to us before choosing between the CGI and the existing Lifetime Capital Gains Exemption.
Other business measures
- Productivity Mega Deduction (confirmed). Announced September 15, 2026 and confirmed in the budget, this would permanently allow immediate 100% expensing of most depreciable property acquired on or after September 15, 2026, in the year it becomes available for use. Finance estimates it covers about two-thirds of business capital investment, up from about 15% under last year’s Super-Deduction. One trap in the draft rules: if you choose not to claim the deduction on eligible property, you may also lose regular CCA on it for that first year. Provinces have not all confirmed they will follow.
- SR&ED expansion. For taxation years beginning on or after November 5, 2026, SR&ED would cover certain commercialization costs tied to an eligible project: regulatory testing, validation and certification, and the cost of obtaining and maintaining intellectual property protection. This builds on the $6 million enhanced expenditure limit introduced in Budget 2025. CRA is expected to publish sector-specific guidance. For more detail, including how this works with the Productivity Mega Deduction, see our SR&ED team’s article, Budget 2026 and Your Business: Expanded Incentives.
- Part VI.1 tax relief for private companies. Dividends paid by Canadian-controlled private corporations (CCPCs) on taxable preferred shares on or after November 5, 2026 would no longer attract Part VI.1 tax. This removes a common compliance headache in estate freezes and reorganizations that use preferred shares.
- Loss transfers within corporate groups (consultation). Wholly owned groups could elect to transfer current-year non-capital losses between parent and subsidiary, or between sister subsidiaries. As proposed, it only works where each company has a permanent establishment in one, and the same, province. Comments are due January 8, 2027.
- Less paperwork on elections. Corporations would no longer need to file a certified directors’ resolution with elections such as capital dividend elections and SR&ED expenditure transfers, once the legislation receives royal assent.
- Cross-border and non-resident sales. From January 1, 2027, purchaser withholding on most taxable Canadian property would drop from 25% to 15% of the price (50% to 30% for specified property). Fully tax-deferred section 85 rollovers would be exempt from withholding if the election and a CRA notice are filed within 30 days. Trust distributions that indirectly reach non-residents through a corporation or partnership lose rollover treatment from November 5, 2026.
- Clean economy credits. The Clean Technology and Clean Electricity investment tax credits are extended to property available for use before 2041.
Filing, payment and administrative changes
Several changes affect almost every client, individual or corporate.
| Change | Proposed rule | Starts |
|---|---|---|
| Personal filing and payment deadline | May 15 for all individuals, including the self-employed and their spouses | 2027 tax year (returns filed in 2028) |
| Instalment threshold | $7,500 of net tax owing (from $3,000) for individuals outside Quebec and for corporations; indexed | Tax years beginning on or after January 1, 2028 |
| Single annual instalment for self-employed | Two-thirds of estimated tax by December 31, balance on the filing due date | 2028 tax year |
| T1135 foreign property reporting | Required above $200,000 of cost (from $100,000); simplified reporting below $500,000 | Proposed |
| Notice of objection | One year from the assessment (individuals: later of one year or two years from the filing due date); no extensions available | Assessments sent 3 months after royal assent |
| CRA reporting to credit bureaus | Permitted for final, uncontested tax debts over $50,000 | On royal assent |
| Administrative penalties | Most fixed penalties doubled or tripled for inflation; 3x for medium and 8x for large corporations; higher penalties for repeat failures | Tax years ending after 2027 |
For individuals, the budget also adds optional flat-amount claims for several deductions and credits (for example, a flat $1,000 relocation deduction and a $1,500 labour mobility deduction for tradespeople), makes the Canada Caregiver Credit refundable from 2027, and opens a consultation on merging the RRSP and RRIF into a single “RRSP for life”.
Owners of individual pension plans (IPPs) should note new rules from 2028, including that a plan holding assets above 200% of its liabilities could become revocable.
What to do now
- Raising capital or issuing shares to key employees? Talk to us before the next issuance so the shares are structured to qualify for the Canada Growth Incentive.
- Planning a sale in the next few years? Revisit whether the Lifetime Capital Gains Exemption, the CGI or the expanded rollover gives the better result.
- Buying equipment or other capital assets? Model the Productivity Mega Deduction before year-end, including the provincial impact.
- Doing R&D? Track regulatory, certification and IP costs separately from now on so they can be claimed under the expanded SR&ED rules.
- Using preferred shares in a freeze or reorganization? The Part VI.1 change may simplify your structure.
- Selling Canadian property as a non-resident, or distributing trust property abroad? Speak with us about the new withholding and rollover rules.
- Feeling the impact of U.S. tariffs? Ask us whether the RTRI, BDC’s Pivot to Grow, or both fit your situation (details below).
If you have questions about how Budget 2026 affects you or your business, please contact your Kreston GTA advisor.
This bulletin is general information based on the budget proposals as tabled on November 5, 2026, and on FedDev Ontario and BDC program pages as of the date above. Program terms can change and funding decisions rest with each agency. Measures may change before they become law. It is not advice for your specific situation; please speak with us before acting on it.
Beyond the budget: FedDev Ontario’s Regional Tariff Response Initiative (RTRI)
The RTRI is federal funding for businesses hurt by tariffs and trade disruption, and it is separate from Budget 2026. In southern Ontario it is delivered by FedDev Ontario and is accepting applications now. On September 8, 2026 it was expanded with an extra $1.5 billion nationally (total $3.45 billion) and a new liquidity stream.
| Stream | Funding type | Maximum | Cost share | Timing |
|---|---|---|---|---|
| Liquidity assistance | Non-repayable | $2 million, based on demonstrated need | Up to 50% of eligible costs | Up to 12 months, ending by March 31, 2028 |
| Pivot project (local or regional) | Non-repayable | $1 million | Up to 50% of eligible costs | Completed by March 31, 2029 |
| Pivot project (larger, transformative) | Repayable | Over $1 million | Up to 75% of eligible costs | Completed by March 31, 2029 |
A business can apply for both streams at once, up to $3 million combined non-repayable and $20 million in total RTRI funding. Liquidity funding covers wages, rent or lease payments, utilities, business insurance and property taxes. Pivot projects cover productivity and modernization, equipment, automation and digitization, market diversification, export development and supply chain resilience.
Who qualifies
Applicants must be incorporated for-profit businesses located and operating in southern Ontario, with at least $1 million of annual revenue in one of their last two fiscal years, and viable before tariffs. They must also show tariff impact through at least one of:
- operating in a sector hit by U.S. Section 232 or Section 338 tariffs, including indirectly as a supplier to an affected exporter
- earning 25% or more of revenue from goods ultimately exported to the U.S.
- harm from tariffs or the uncertainty around them, such as higher input costs, supply chain disruption, or lost customers or revenue
- for the liquidity stream, a demonstrated cash-flow need caused by tariffs
Retailers, local consumer services, utilities, oil and gas extraction and construction services are generally not eligible. Professional services, warehousing and logistics firms qualify only if they play a critical role in a tariff-hit manufacturer’s export supply chain. Only one FedDev application can be open at a time.
Our view
- The evidence is the application. Expect to show the tariff link with numbers: export sales by destination, input cost increases, lost contracts, and cash-flow forecasts with and without support.
- Liquidity funding has a clock on it. It must end by March 31, 2028, so businesses under cash pressure now should not wait.
- Pairing streams makes sense. Liquidity support buys time; a pivot project funds the response. Showing both a short-term need and a credible plan should strengthen an application.
- Repayable means repayable. Confirm repayment terms with FedDev for larger projects and model them against existing bank covenants.
- Stack it with the budget. Equipment funded through a pivot project may also qualify for the Productivity Mega Deduction, and government assistance generally reduces the tax cost of the asset. We can model the combined effect.
Beyond the budget: BDC’s Pivot to Grow program
Pivot to Grow is BDC financing for Canadian businesses hurt by U.S. tariffs. Unlike the RTRI, it is a loan, not a grant, but on preferential terms. It is available nationally until March 31, 2028 or until the funding envelope runs out.
On August 25, 2026, BDC expanded the program with a new liquidity stream after the latest round of U.S. tariffs, lowered the minimum revenue to $1 million and simplified the application. It also offers eligible exporting clients a six-month principal payment deferral.
| Stream | Purpose | Interest-only period | Maximum repayment term |
|---|---|---|---|
| Liquidity loan | Day-to-day cash flow under tariff pressure | Up to 36 months (0% interest for the first 12 months) | 96 months |
| Pivot working capital loan | Supply chain changes, new markets, products or industries | Up to 24 months | 84 months |
| Equipment loan | Productivity investments | Up to 24 months | 168 months |
Liquidity loans range from $250,000 to $5 million. Each stream is capped at $5 million, to a maximum of $10 million per business. Loans can be prepaid at any time without penalty.
Who qualifies
- Canadian-based, with at least $1 million of annual revenue, three years in business and historically positive cash flow
- At least 15% of sales from exports to the U.S.; for the liquidity loan, tariffs must also equal at least 5% of revenue
- For pivot and equipment loans, either the 15% export test, or revenue down or costs up by at least 10% because of U.S. tariffs
- Viable before tariffs, with a material negative impact on operations and profitability
Pivot and equipment loans require an up-to-date resilience plan showing how the business will adapt; the liquidity loan does not. Businesses already using BDC’s steel and aluminium, forestry liquidity or softwood lumber programs cannot also take Pivot to Grow liquidity support. If the tariffs in force since August 19, 2026 are lifted, the liquidity stream stops automatically.
Our view
- RTRI first, BDC alongside. Non-repayable RTRI funding is cheaper money; Pivot to Grow can fund the balance of a project or bridge cash flow while an RTRI application is assessed.
- The resilience plan does double duty. The same plan, with numbers, can support both a BDC pivot loan and an RTRI pivot application.
- Pair equipment loans with the Mega Deduction. BDC itself points borrowers to the new immediate expensing rules. The tax savings can help service the loan; we can model the after-tax cash flow.
- Mind your existing lenders. New BDC debt may need consent under existing bank covenants or security arrangements.
Note: the government has announced it intends to merge BDC and Export Development Canada. BDC says its programs continue unchanged for now.
