Department of Finance Canada released draft legislative proposals for consultation on a broad package of previously announced tax measures.
The August 15 package matters because it moves several budget and fall-statement commitments from policy announcement into draft statutory language. That is the stage where taxpayers, advisers, businesses, charities, and industry groups can see how the measures may actually be written into the Income Tax Act, Excise Tax Act, Global Minimum Tax Act, and related regulations.
For small-business investment, the draft proposals would expand what qualifies as an eligible small business corporation share and relax certain conditions for the capital gains rollover on business investment. Those changes were announced in the 2024 Fall Economic Statement.
For business succession, the package would add a $10 million capital gains exemption for qualifying sales of businesses to worker co-operatives. It would also make technical changes to the existing exemption for sales to employee ownership trusts, a measure linked to Budget 2024.
For innovation-focused businesses, the draft legislation would increase the annual expenditure limit and taxable-capital phase-out thresholds for the enhanced 35% scientific research and experimental development investment tax credit. It would also extend the refundable credit to small public corporations and restore eligibility for capital expenditures.
The package also included transparency and compliance measures. Finance Canada said the proposals would enhance reporting requirements for non-profit organizations, implement the OECD Crypto-Asset Reporting Framework in Canada with adjustments to the Common Reporting Standard, and give the Canada Revenue Agency enhanced audit powers, including a new penalty for non-compliance.
Housing and infrastructure financing were included through proposed EIFEL relief. The draft legislation would exempt debt used to fund the acquisition, construction, or conversion of purpose-built residential rental buildings from the excessive interest and financing expenses limitation rules. A separate exemption would apply to debt used for a regulated energy utility business carried on in Canada.
International tax also appeared in the package through the remaining portion of the substantive Canadian-controlled private corporation measure dealing with passive income of foreign affiliates, originally proposed in Budget 2022.
Finance Canada also released separate GST/HST draft legislation in response to a Federal Court of Appeal decision. The proposed Excise Tax Act amendment would restrict input tax credits for redeemed coupons so they are available only for payments made exclusively in the course of commercial activities.
That GST/HST proposal would apply effective August 16, 2025, and to input tax credits for payments that had not already been claimed in a return filed on or before August 15, 2025.
The consultation deadline was September 12, 2025. For readers, the practical point is that this was not one narrow tax change. It was a large technical package touching owner-managed businesses, SR&ED claimants, non-profits, crypto reporting, CRA audit practice, rental construction financing, utilities, foreign-affiliate planning, and GST/HST recovery.