Yesterday, her Excellency the Right Honourable Julie Payette, Governor General of Canada, delivered the Speech from the Throne to open the second session of the 43rd Parliament and outline the government’s agenda (full sentence taken from Canada.ca).
Throne speeches do not generally involve exact plans and figures. Yesterday’s speech covered the following high-level themes:
-The Wage Subsidy will be extended until next summer
-The government intends to expand the $40,000 Canada Emergency Business Account
-National standards for long-term care
-The government is also eyeing a new disability benefit, which would be modelled after the guaranteed income supplement (GIS) for seniors, as well as a new employment strategy for people with disabilities.
It is also clear that changes will be made to repay the sum of government spending we have seen this year. Justin Trudeau referred to partially financing programs by taxing “extreme wealth inequality”. There has been lots of speculation in financial media as to what this could be: wealth tax, capping or removal of the principal residence exemption, higher corporate tax….and one that is most relevant to You First investors, which is increasing the inclusion rate for the capital gains tax.
To be clear, no one know anything yet and nothing official has been announced. However, a lot of readers will be aware that there is historical precedent for a higher capital gains tax. Canada started taxing capital gains in 1972 at a 50% inclusion rate. That rate went up to 66.67% in 1988, and reached as high as 75% in the 1990s, before dropping back to 66.67% and then 50%, both in 2000.
If government were to increase the inclusion rate, we have no idea whether it will take effect immediately or the next tax year (2021).
So, what do you do? Do you gamble on the possibility of being subject to a higher rate in the future and sell now at 50%? Perhaps. If you intended on selling off a non-registered holding in the next year or two, there is merit to selling it now while we know the inclusion rate is 50%.
For any gamblers out there, who intend on drawing from their non-registered account, please get in touch with us and we will strategize over this issue!