Tax policy rarely moves quickly enough to create urgency for business owners. The 2024 federal budget was an exception.

The changes announced — and partially implemented — in 2024 have prompted a wave of conversations among Maritime business owners that didn’t exist before. Some of those conversations are driven by genuine urgency. Others are driven by confusion about what actually changed, what it means personally, and whether the political uncertainty that has followed affects their planning at all.

This article cuts through the noise. Here’s what changed, what it means for a business owner thinking about selling, and how to think about whether any of this should affect your timeline.

Important: Tax law in this area has been and remains in flux. The information here reflects the situation as of early 2026, but the rules affecting capital gains on a business sale should be confirmed with a qualified tax advisor before any transaction decisions are made. This article is educational — it is not tax advice.

What the 2024 Budget Actually Proposed

The federal government’s April 2024 budget contained two significant changes relevant to business owners contemplating a sale.

The first was an increase in the capital gains inclusion rate. Prior to the change, individuals paid tax on half of their capital gains, while corporations and trusts paid on two-thirds. The budget proposed increasing the inclusion rate to two-thirds for individuals on gains exceeding $250,000 in a calendar year, and to two-thirds for all corporate and trust capital gains with no threshold.

In plain terms: a larger portion of your gain becomes taxable income. For a business owner selling a company and realizing a multi-million dollar gain, this change — if it stands — meaningfully increases the tax cost of that transaction.

The second change was an increase to the Lifetime Capital Gains Exemption (LCGE). The 2024 budget increased the exemption limit for qualifying small business corporation shares to $1.25 million, up from approximately $1.016 million previously. This change has been legislated and is in effect.

Taken together, the picture is mixed: the LCGE increase benefits qualifying sellers, while the inclusion rate increase (if it stands) penalizes gains above the exemption threshold.

The Inclusion Rate: Where Things Stand

Here is where complexity enters the picture. The inclusion rate increase was announced in April 2024 and applied by the Canada Revenue Agency from June 25, 2024 onward — including for the 2024 tax year. However, the enabling legislation was never passed by Parliament before the government was prorogued in early 2025, and as of early 2026, the political situation remains unresolved.

What this means practically: the CRA administered the higher inclusion rate for gains realized on or after June 25, 2024, but the law that was supposed to enshrine this change was never enacted. A subsequent federal election and potential change in government have created genuine uncertainty about whether the higher inclusion rate will remain in place, be reversed, or be modified.

This is not a reason to ignore the issue. It is a reason to work closely with a tax advisor who is tracking the developments in real time, and to structure any transaction with both scenarios in mind.

What the LCGE Increase Means for You

The Lifetime Capital Gains Exemption increase is less ambiguous — it’s legislated, it’s in effect, and it benefits qualifying sellers.

The LCGE allows an individual who sells qualifying small business corporation (QSBC) shares to shelter up to $1.25 million in capital gains from federal tax. In a family business where shares are held by multiple family members, each individual can claim their own exemption — effectively multiplying the total shelter available to the family.

To qualify, the shares must meet specific tests:

• The corporation must be a Canadian-controlled private corporation (CCPC)
• At least 90% of the corporation’s assets must be used in an active business at the time of sale
• The shares must meet the 24-month holding period requirement
• Throughout the 24 months prior to the sale, more than 50% of the assets must have been used in an active Canadian business

This is not automatic. Many business owners discover when they start planning a transaction that their corporate structure doesn’t qualify as currently set up. This is exactly why pre-sale tax planning with experienced advisors matters — and why it needs to happen early. If your business qualifies and you haven’t structured things to make full use of the LCGE, or if shares haven’t been appropriately distributed among family members who could claim their own exemptions, there is real money being left on the table.

How the Math Changes on a Real Transaction

Consider a simplified example to illustrate the stakes. A business owner sells their company for $5 million; after adjustments, their capital gain is $4 million.

	Old Rate (50% inclusion)	Proposed Rate (66.67% inclusion)
Capital gain	$4,000,000	$4,000,000
LCGE shelter	($1,000,000)	($1,250,000)
Taxable gain	$3,000,000	$2,750,000
Included in income	$1,500,000	$1,833,000
Additional income included	—	+$333,000
Approx. additional tax (at ~50% marginal rate)	—	~$165,000 more

That’s not a rounding error. It’s a meaningful number that justifies the time and cost of proper pre-sale tax planning. It also illustrates why some owners who were planning to sell in 2025 or 2026 accelerated their timelines in response to the 2024 announcements — and why the uncertainty around whether the inclusion rate change will hold has created real planning complexity for those who didn’t.

The Holdco Structure: Why It Matters More Than Ever

One pre-sale planning step that has become more important in light of the 2024 changes — and that benefits qualifying sellers regardless of where the inclusion rate lands — is ensuring the right corporate structure is in place before a transaction.

Many Atlantic Canadian business owners have operated through a single operating company for decades. That structure is simple and functional for running a business, but it may not be optimal for a sale. A holding company (holdco) structure — where a holdco owns the shares of the operating company — creates flexibility that a single-company structure doesn’t:

• Retained earnings can be moved to the holdco over time, protected from business risk and positioned for investment or distribution after a sale
• Facilitates estate freezes and allows shares to be distributed to family members to multiply LCGE use
• Provides deal structuring options that a single opco doesn’t allow
• Enables real estate to be held separately from the operating business — a meaningful structuring advantage for many owners

Setting up a holdco takes time to do properly, and attempting to restructure in the middle of an active sale process is expensive, slow, and sometimes not feasible. This is a planning step that belongs in the 24-to-36-month preparation window, not the final six months before going to market.

The holdco structure also matters for managing what happens to sale proceeds after closing. An owner who receives $4 million personally faces immediate tax consequences at the highest marginal rate. An owner whose holdco receives those same proceeds has far more flexibility — investing through the holdco, distributing income over time, or structuring an estate transfer at a lower effective rate. That flexibility has real dollar value, independent of how the inclusion rate debate resolves, and it only exists if the structure was established well before the transaction.

For owners in Nova Scotia, New Brunswick, or Prince Edward Island, the provincial tax implications deserve specific attention. Nova Scotia in particular has among the highest combined federal-provincial marginal rates in the country for high-income earners — a factor that makes efficient pre-sale structuring even more valuable for NS-based sellers than elsewhere.

Employee Ownership Trusts: A New Option Worth Knowing

The 2023 federal budget introduced Employee Ownership Trusts (EOTs) as a new option for business succession in Canada, with refinements and incentives added in 2024. EOTs allow a business owner to sell their company to a trust structured for the benefit of employees, with the transaction financed by the business’s own future earnings.

The 2024 changes included a specific capital gains exemption for qualifying EOT transactions — allowing owners to exclude up to $10 million in capital gains from taxation under certain conditions. This is a significant incentive for owners who are interested in employee succession.

EOTs are not a fit for every business. They work best when:

• The business has strong, stable operating cash flow (the trust services acquisition debt from earnings)
• The workforce is long-tenured with genuine buy-in to the concept of employee ownership
• The seller is willing to accept deferred payment over a multi-year period rather than full proceeds at closing
• Legacy and community continuity matter as much as maximizing the headline price

The legal and structural complexity is real — this is not a transaction you set up with generic documents. An M&A advisor and tax counsel with EOT experience can tell you quickly whether your business is a candidate.

Should the Tax Changes Affect Your Timeline?

This is the question every business owner considering a sale in the next few years should be asking their advisors. The honest answer depends on your specific situation:

• If you were planning to sell within 18 to 24 months — the tax environment is a legitimate reason to look seriously at whether your timeline should move. Not necessarily to rush, but to accelerate preparation and have the conversation with your advisory team about what a properly structured, tax-efficient transaction looks like under current and potential future rules.
• If you were planning to sell in three to five years — the picture is less clear. The political and legislative uncertainty means you’re potentially planning against a moving target. What’s more actionable is ensuring you’ve taken steps that are beneficial regardless of which way the inclusion rate goes: LCGE qualification, shareholding structure, and a holdco that supports flexible deal structuring.
• If you had no specific timeline in mind — the 2024 changes are a reasonable prompt to at least have the conversation with an M&A advisor and your accountant. Not to make a decision, but to understand what the current environment looks like for your specific situation.

What Doesn’t Change Regardless of Tax Rules

Here is the thing about tax-driven urgency: it can push owners toward transactions that aren’t actually ready to be done. A business that is sold before it’s properly prepared, to a buyer who was the first to show interest rather than the best available, will underperform a well-prepared sale — often by more than the tax savings that motivated the rush.

A poorly prepared business sold quickly to beat a tax deadline is not a good trade. The fundamentals of a good exit don’t change because of budget announcements.

Preparation still takes time. Financial cleanup still matters. Owner dependency still suppresses multiples. The quality of your advisory team still determines how much of your business’s value you actually capture in a transaction.

Tax planning is one dimension of exit planning — an important one, but not the only one. The owners who do best are the ones who integrate tax strategy into a comprehensive exit plan, not the ones who let tax considerations substitute for one. Business preparation, advisory team quality, and process discipline determine the majority of your outcome. Tax planning determines how much of that outcome you keep. Both matter — but in that order.

The 2024 changes created real urgency for some owners and legitimate questions for many others. If you don’t know clearly which category you’re in, that’s the right conversation to have next — with an M&A advisor and a tax accountant who have both been through real business sale transactions, not just annual filings.

Want to understand how the current tax environment affects your exit? Book a tax-aware consultation with Conexus M&A. We’ll help you understand the current rules, what they mean for your specific situation, and how to structure preparation that gives you the best outcome regardless of how the legislative picture evolves.