Budget 2024: Growing Canada’s small businesses

April 21, 2024 - Toronto, Ontario - Department of Finance Canada

Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, and the Honourable Rechie Valdez, Minister of Small Business, highlighted Budget 2024: Fairness for Every Generation, the government’s plan to drive economic growth in a way that is shared by all. Budget 2024 is a plan to build a Canada that works better for every generation, where younger generations can get ahead, where their hard work pays off, and where they can buy or rent their own home—where everyone has a fair chance at a good middle class life.

Through Budget 2024, the government is making it easier for new businesses to start-up and for existing businesses to grow, by cutting red tape and providing the tools businesses need to scale-up.

First, Budget 2024 launches the new Canada Carbon Rebate for Small Businesses.  This new refundable tax credit will urgently return proceeds from the price on pollution from 2019-20 through 2023-24 to an estimated 600,000 businesses, with 499 or fewer employees, in provinces where the federal backstop applies. This would deliver over $2.5 billion directly to these small- and medium-sized businesses. The only requirement to receive the automatic, ongoing direct payments is for eligible business to file their taxes. To be eligible for the 2019-20 to 2023-24 payments, the deadline to file a tax return is July 15, 2024.

Second, Budget 2024 increases the Lifetime Capital Gains Exemption. Effective June 25, 2024, the exemption will increase to $1.25 million from the current amount of $1,016,836 in capital gains tax-free on the sale of small business shares and farming and fishing property. The Lifetime Capital Gains Exemption will continue to be indexed to inflation thereafter. In 2025, Canadians with eligible capital gains of below $2.25 million will be better off under these changes.

Third, Budget 2024 creates a new Canadian Entrepreneurs’ Incentive. The inclusion rate will be reduced to 33.3 per cent on a lifetime maximum of $2 million in eligible capital gains for business owners. This is designed to particularly benefit innovative entrepreneurs in research and start-up phases, to scale-up their businesses, especially in the technology and manufacturing sectors. When this incentive is fully rolled out, entrepreneurs will have a combined total and partial exemption of at least $3.25 million when selling all or part of a business—encouraging innovators to keep innovating in Canada. The new Canadian Entrepreneurs’ Incentive will mean entrepreneurs will be better off when earning capital gains of up to $6.25 million, such as from selling their business.

Fourth, Budget 2024 invests in Canadian start-ups through the Venture Capital Catalyst Initiative. This $200 million investment over two years, starting in 2026-27, on a cash basis, will increase access to venture capital for equity-deserving entrepreneurs, and to invest in underserved communities and outside key metropolitan hubs.

Fifth, Budget 2024 takes steps to boost government procurement from innovative small- and medium-sized businesses. To do this the government intends to propose legislated procurement targets for small- and medium-sized businesses and innovative firms.

Budget 2024 will build a fairer Canada, where every generation can reach their full potential. It makes Canada’s tax system more fair by asking the very wealthiest to pay their fair share—so that we can make investments in prosperity for every generation. This is a responsible economic plan that upholds the fiscal objectives outlined in the 2023 Fall Economic Statement, and sees Canada maintain the lowest deficit- and net debt-to-GDP ratios in the G7.