Budget 2026: What It Means for Ontario Business Owners

This guide covers the Budget 2026 measures most likely to come up for an incorporated Ontario owner. It does not cover every measure in the budget.

Is any of this law yet?

No. A federal budget sets out what the government intends to do. The tax measures only take effect once Parliament passes the legislation, and details can change on the way. The budget's own tax annex describes these as measures "proposed in Budget 2026" and uses "would" throughout. The RRSP for life is at an even earlier stage: it is an announced intention, with a public consultation open until January 8, 2027.

Until any of this is enacted, the rules in force today apply.

What are the main proposals, at a glance?

What would change for Individual Pension Plans?

The budget proposes three changes. Together they would stop plans avoiding IPP status by adding related members, and limit how much surplus a plan can hold.

A wider definition, from January 1, 2027. Today an IPP is a defined benefit registered pension plan with fewer than four members, at least one of whom is related to a participating employer. The budget proposes that a plan would also be an IPP if all of its members are related to a participating employer or do not deal at arm's length with a member who is.

Investment rules, from January 1, 2028. IPPs would become subject to the same advantage, non-qualified investment and prohibited investment rules that already apply to RRSPs, RRIFs and TFSAs. If an IPP acquired a non-qualified or prohibited investment, the controlling individual would owe a tax of 50% of its fair market value. An advantage would be taxed at 100% of its value. Transitional rules are proposed for investments acquired before 2028.

A 200% surplus test, from January 1, 2028. If an IPP's assets exceeded 200% of its pension liabilities, the plan would become revocable. Under the existing process, the CRA must issue a notice of intent at least 30 days before revoking registration, which would give the administrator time to act, for example by withdrawing excess amounts.

If you have an IPP, or are considering one, it is worth asking your accountant and the plan's actuary how these proposals would apply. Our Individual Pension Plan guide explains how the plans work today.

What is the "RRSP for life" proposal?

The government intends to merge the core features of the RRSP and the RRIF into one plan. That would remove the need to convert an RRSP at 71. People over 71 would still have to make minimum withdrawals.

The budget also asks for views on two questions: whether a spouse or common-law partner could take over the plan as a successor holder, and whether the current rollover rules on death could be replaced with direct tax-free transfers to a qualifying survivor's registered plan. Locked-in pension money adds a complication, because federal and provincial pension rules may need to change too.

Today's rule has not changed. Under current CRA guidance, you choose what happens to your RRSP by the end of the year you turn 71, and December 31 of that year is the last day you can contribute to your own RRSP. Our guide to converting an RRSP to a RRIF covers the current options.

Would fewer owners have to pay tax instalments?

Possibly, from 2028. The budget proposes raising the instalment threshold from $3,000 to $7,500 for corporations and for individuals who live outside Quebec. The threshold would then be indexed to inflation and rounded to the nearest $500.

Today, an Ontario resident generally has to pay instalments if their net tax owing is more than $3,000 in the current year and was also more than $3,000 in either of the two previous years. A corporation generally does not have to pay instalments if its tax payable is $3,000 or less for the current or the previous year. The proposed change would apply to taxation years that begin on or after January 1, 2028, and the same look-back test would continue.

A second proposal, also from the 2028 tax year, would let individuals whose primary source of income is a business, including professional or commission income, make one instalment of two thirds of their net tax owing by December 31 instead of quarterly payments. The rest would be due on the balance-due date. If you pay yourself salary or dividends from a corporation, ask your accountant whether this would apply to you.

Is the personal tax deadline moving to May 15?

That is the proposal, starting with the 2027 tax year. Every individual, including self-employed people and their spouses or common-law partners, would file their personal return and pay any balance owing by May 15.

Nothing changes for the 2026 tax year. Most people file and pay by April 30, 2027. Self-employed people and their spouses or common-law partners have until June 15 to file, but any balance is still due by April 30. One practical effect for self-employed filers: the proposal would bring the filing date earlier, from June 15 to May 15, while giving more time to pay. This measure is about personal T1 returns.

What is the Canada Growth Incentive?

It is a proposed new capital gains exemption of up to $15 million per individual for each business, on the sale of qualifying shares of a qualifying corporation. It would apply only to newly issued shares that meet strict conditions, so many existing owners would not qualify.

The main conditions in the budget include:

• The shares would have to be issued on or after November 5, 2026 and before 2037, by a Canadian-controlled private corporation, for cash or for employment services.
• The corporation and related corporations could not have more than $100 million in combined assets, by carrying value, just before and after the shares are issued.
• The individual would have to hold the shares for at least 36 months before selling, and asset tests would apply at issue, throughout ownership and at sale.
• Many businesses are excluded, including consulting, professional practices such as accounting, law, medicine, other health care, engineering and architecture, and businesses in the financial, insurance, real estate, food and accommodation sectors, among others. Franchised and licensed businesses are also excluded.

Using this exemption would limit the Lifetime Capital Gains Exemption on shares of the same corporation, and the reverse is also true. Integrity rules are still to be released. If you practise through a professional corporation, the proposed exclusions are likely to cover your practice, which is worth confirming with your accountant. Our business succession guide explains how these exemptions fit into planning a sale.

What should you take to your accountant?

Depending on your situation:

• If you have an IPP: would the wider definition, the investment rules or the 200% test affect our plan, and when?
• If you are approaching 71: what do we do under today's rules while the RRSP for life is only a proposal?
• Are we likely to fall under the proposed $7,500 instalment threshold from 2028, personally or in the corporation?
• If we are raising capital or issuing shares: could the Canada Growth Incentive apply, and how does it interact with the Lifetime Capital Gains Exemption?

Most of these measures would not start until 2027 or 2028, and all of them could change before they become law.

Where do we fit?

LG Financial Group is an insurance agency. Your accountant leads the tax side, and we complement them. For owners with a pension plan, we coordinate the actuary, the set-up and the paperwork, and our tax strategies overview shows the structures we review with owners and their accountants. Our planning guide for business owners looks at how the pieces fit together.

Sources

• Department of Finance Canada, Budget 2026: Tax measures, supplementary information
• Canada Revenue Agency, Who has to pay instalments (individuals)
• Canada Revenue Agency, Who has to pay in instalments (corporations)
• Canada Revenue Agency, Due dates and payment dates for personal income tax
• Canada Revenue Agency, RRSP options when you turn 71
• Canada Revenue Agency, Receiving income from an RRSP