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Budget 2026, tabled on 5 November 2026, proposes a Canada Growth Incentive (CGI) capital gains exemption of up to $15 million per qualifying individual for each business. It would cover qualifying shares issued on or after Budget Day and before 2037, with a 36 month holding period. A related change to the small business rollover would start on January 1, 2027. All of it is a proposal, and key details are still to come.
What is the Canada Growth Incentive exemption?
Budget 2026 proposes a new Canada Growth Incentive capital gains exemption. It would let a Canadian-resident individual claim a tax exemption on capital gains from selling qualifying shares of a qualifying corporation, up to a $15 million limit. The budget says the $15 million would apply separately to each qualifying individual for each business.
This is a proposal and not law. The words in the budget are that it would apply to qualifying shares of a qualifying corporation issued on or after Budget Day and before 2037. In other words, it targets new share issuances over roughly the next decade, not shares you already own. Budget Day was 5 November 2026.
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Who and which shares would qualify?
A qualifying individual would have to be an individual other than a trust, at least 18 years old when acquiring a qualifying share, and resident in Canada throughout the year in which the exemption is claimed. A partnership that holds the shares can also be part of the picture, if the individual was a member and at least 18 at the time.
The budget sets several tests on the shares and the company. At the time of issuance, the corporation must be a Canadian-controlled private corporation. All or substantially all of the fair market value of its assets must be tied to assets used, or reasonably intended to be used within 36 months, mainly in a qualifying business carried on primarily in Canada. The combined carrying value of the assets of the corporation and related corporations must not exceed $100 million immediately before and after the issuance. The share must be issued solely for cash, or in exchange for employment services provided by the individual to the corporation.
After issuance, 50 per cent or more of the fair market value of the corporation's assets must be tied to a qualifying business for as long as the shares are held. The business must be carried on primarily in Canada for at least 24 consecutive months after issuance. At the time of sale, the corporation must be a Canadian-resident private corporation, or a public corporation listed on a designated stock exchange in Canada, and all or substantially all of its asset value must again be used mainly in a qualifying business.
What is the holding period, and which businesses are excluded?
The share would have to be held by the qualifying individual, or by the partnership they belong to, for at least 36 consecutive months immediately before the sale. So the quickest possible exit that still qualifies is three years after investing.
A qualifying business would be an active business, other than a few excluded types. The budget excludes consulting services, professional practices of accountants, lawyers, notaries, physicians, other health care practitioners, engineers and architects, and any business whose main asset is the reputation or skill of one or more employees. It also excludes businesses in agriculture, fishing, forestry, mining, finance, insurance, utilities, real estate, food and accommodation, arts, recreation or entertainment, and businesses run under a licensing or franchising agreement.
For founders and early employees of a technology or manufacturing startup, that list is the main filter. A local restaurant, a farm or a law firm would not count under the budget text.
What could a simple example look like, and how does it connect to other exemptions?
Here is an example with invented round numbers. Say an employee-founder invests $50,000 cash in a Canadian-controlled private corporation after Budget Day and holds the shares for four years. If every test were met and she sold for $2 million, her gain would be $1,950,000. That is well under $15 million, so under the proposal the whole gain could be exempt. If the same person held shares in the same business worth far more, only gains up to $15 million would be covered for that business. Whether any test fails would depend on the final legislation.
On interactions, the budget says a CGI exemption claimed on shares of a corporation would limit the ability to claim the Lifetime Capital Gains Exemption on shares of the same corporation, and a Lifetime Capital Gains Exemption claim would likewise limit the CGI claim for that corporation. You could not simply stack both on the same company. For the existing exemption, see Lifetime Capital Gains Exemption: Limits and Rules and Qualified Small Business Corporation Shares Explained.
The budget adds that a qualifying individual could generally claim both the exemption on a sale to an Employee Ownership Trust or a worker cooperative and the CGI exemption on the same sale of shares. Using one would have no impact on the limit under the other.
How would AMT and anti-avoidance rules apply?
The Alternative Minimum Tax is a parallel calculation that allows fewer credits, deductions and exemptions than the ordinary rules. Taxpayers pay whichever is higher, and any AMT above regular tax can normally be carried forward for up to seven years. The budget says capital gains exempted through the CGI would be subject to an inclusion rate of 30 per cent for AMT purposes, consistent with gains eligible for the Lifetime Capital Gains Exemption. So a large exempt gain could still raise the AMT figure for the year, even if regular tax is nil.
The budget also says integrity rules will be proposed to stop uses that do not match the intent, including multiplying the limit by using multiple corporations that carry on the same underlying business. Details of those rules will be released at a later date. Until then, anyone planning around the $15 million limit has an unfinished picture. For related reading, see Capital Gains Exemption: Lifetime Limit and Home Sales.
What changes for the small business rollover, and what should you do now?
Under the existing rollover, an individual can defer tax on a gain from selling eligible small business corporation shares to the extent the proceeds buy replacement shares in the year of sale or the next calendar year. Budget 2026 proposes to extend the replacement period to the year of disposition and the three following calendar years. A person who does not reinvest in the year of sale could choose to pay tax or claim a reserve that defers the gain until the end of the replacement period.
If the investor signs an agreement with an eligible small business corporation before the end of the three year period under which capital is provided upfront for shares issued later, such as a simple agreement for future equity, the deferral could run two more years, for a total of up to five. If no shares are issued by the end of the fifth year, the deferred gain would be taxed. Interest would apply at a prescribed rate on proceeds that are not invested in replacement shares.
The budget also proposes to lower the active business asset test during the holding period from all or substantially all to primarily, while keeping the all or substantially all test at issuance and at sale. These rollover changes would apply to qualifying dispositions on or after January 1, 2027.
What to do now: nothing needs filing. If you are considering an investment in a startup, keep records of the date, the amount, the form of payment and the company's status at issuance, since the budget ties eligibility to the moment of issuance. Wait for the legislation and the integrity rules before building a plan on the $15 million figure. See also Capital Gains Tax on Investments and Property for how gains are taxed under current rules.
This guide uses the budget document named in the sources, checked on 9 November 2026. It is an independent information site, offers no services, does not represent the CRA or any organization, collects information from open sources, does not guarantee accuracy and accepts no liability for how you use it.
Frequently asked questions
Is the Canada Growth Incentive exemption in force?
No. Budget 2026 proposes it. It would apply to qualifying shares issued on or after Budget Day and before 2037, and legislation would be needed first.
How large is the proposed exemption?
Up to $15 million, applied separately to each qualifying individual for each business, according to the budget text.
How long must I hold the shares?
The budget proposes a minimum of 36 consecutive months immediately before the sale, held by the individual or by a partnership they belong to.
Can I use this and the Lifetime Capital Gains Exemption on the same company?
The budget says a claim under one would limit the other for shares of the same corporation. A sale to an Employee Ownership Trust or worker cooperative could generally use both.
When would the small business rollover change start?
The budget says the rollover changes would apply to qualifying dispositions on or after January 1, 2027, with a longer replacement period of the year of sale and three following years.