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A Detailed Guide to Canada’s New Tax Measures for 2024

Mark Virgil Lofranco • 26 November 2024

With every new tax year, Canadians face fresh changes, and while the impact may be minor for most, high-income earners and business owners could see significant differences due to new legislation introduced in 2023.



What’s New in 2024?


Before diving into the details, here are some key highlights of the changes affecting Canadians this year:


  • Employee Ownership Trusts (EOTs): EOTs are now more accessible, helping employees purchase the businesses they work for without direct payments for shares.
  • Intergenerational Business Transfers (IBTs): Eligibility rules have expanded to include nieces, nephews, grandnieces, and grandnephews.
  • General Anti-Avoidance Rule (GAAR) Penalties: These penalties have increased by 25%.
  • Share Buybacks: Publicly traded companies that repurchase shares will face a 2% tax.
  • Alternative Minimum Tax (AMT): AMT rates have increased, and the minimum income threshold has been raised.
  • Corporate Dividends: Financial institutions can no longer deduct dividends received on market-to-market property.
  • Canada Dental Benefit: An interim measure to reduce dental costs for eligible families until June 30, 2024.


Let’s take a closer look at each of these changes.


Employee Ownership Trusts (EOTs) and Tax Exemptions


An Employee Ownership Trust (EOT) allows employees to buy shares of qualifying businesses. With many baby boomers retiring, succession planning is critical, and EOTs provide a way for business owners to sell their companies to employees, making ownership transfers smoother.


EOTs apply to small- and medium-sized businesses and offer employees extended payment terms to purchase a business. This makes it easier for employees to finance the acquisition without the need for large personal savings.

Changes for 2024: Under the new rules, up to $10 million in capital gains from the sale of a business can be temporarily exempt, making it more attractive for business owners to sell to employees.


Intergenerational Business Transfers (IBTs) Expanded


Succession planning is crucial for Canadian business owners, especially those with family-owned businesses. Intergenerational Business Transfers (IBTs) allow owners to transfer their companies to children or grandchildren, with the sale treated as a capital gain rather than a dividend (which is more heavily taxed).

What’s new for 2024: The definition of “child” now includes adult nieces, nephews, grandnieces, and grandnephews. Additionally, business owners no longer need to maintain majority control to qualify for IBTs. These changes took effect on January 1, 2024.


General Anti-Avoidance Penalties Increase


The General Anti-Avoidance Rule (GAAR) prevents Canadians from benefiting from abusive tax planning schemes. If a transaction is designed primarily to gain a tax benefit and breaks the spirit of the law, it could be deemed tax avoidance.

New for 2024: GAAR penalties now include a 25% penalty on any increase in taxes payable from deemed abusive tax planning. The threshold for what qualifies as tax avoidance has also been lowered—any transaction with tax benefits as one of its main purposes could now be scrutinized.


Share Buyback Tax for Public Companies


Starting in 2024, a new 2% tax applies to publicly traded companies and real estate investment trusts (REITs) in Canada that repurchase shares. This measure aims to reduce corporate buybacks and encourage companies to reinvest in growth and development.


Impact: Most Canadians won’t be directly affected, but companies repurchasing shares will face this new tax, which could influence their financial strategies.


Alternative Minimum Tax (AMT) Increases


The Alternative Minimum Tax (AMT) ensures high-income individuals pay at least a minimum level of tax, even if they have many deductions and credits. Taxpayers must calculate their taxes under both the regular and AMT systems and pay the higher amount.


2024 changes: The basic exemption for AMT rises from $40,000 to $173,205, and the AMT rate increases to 20% (up from 15%). This means middle-class Canadians are less likely to be affected, but high-net-worth individuals may pay more tax under the new rules.


Corporate Dividends and Market-to-Market Property


Starting in 2024, financial institutions in Canada can no longer deduct dividends received from market-to-market property, which includes assets whose value fluctuates based on market conditions. Instead, these dividends must be reported as property income and taxed accordingly.


What it means for Canadians: Certain financial products may become more expensive as financial institutions face an additional $3.15 billion in taxes over the next five years due to this change.


Canada Dental Benefit


Dental care is not covered under Canada’s public healthcare system, but the new Canada Dental Benefit provides interim financial relief for families earning less than $90,000 per year. This benefit helps lower dental costs for children under 12 who don’t have private dental insurance.


What’s new: Depending on family income, eligible children may receive payments of $260, $390, or $650, with up to two payments per child available before June 30, 2024.


These 2024 tax changes could significantly affect high-income earners and business owners, but there are also new benefits for families and expanded opportunities for intergenerational wealth transfers. Stay informed and consult with a tax professional to ensure you’re fully prepared for the year ahead.


Key Takeaways



  • New tax measures support small- and medium-sized businesses, making it easier for employees to take ownership.
  • Intergenerational business transfers (IBTs) now include adult nieces, nephews, grandnieces, and grandnephews.
  • Changes for 2024 include increased anti-avoidance penalties, a new 2% share buyback tax for public companies, and updates to the alternative minimum tax (AMT).

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