On November 5, 2026, the Government of Canada released Budget 2026: Masters of Our Destiny. The budget proposes several tax measures that could significantly affect individual taxpayers, particularly those with self-employment income, investment income or foreign assets.
Among the key proposed changes are higher income tax instalment thresholds, a new annual instalment payment option for eligible self-employed individuals, revised personal income tax filing and payment deadlines, and an increased reporting threshold for foreign assets under Form T1135.
For Canadian tax residents who own foreign bank accounts, investments or real estate, as well as individuals earning business or rental income, these proposed changes are worth understanding in advance.
Important: The measures discussed in this article are based on proposals included in Budget 2026. They should not be treated as enacted tax law until the relevant legislation receives Royal Assent and comes into force.
- Personal Income Tax: Three Key Proposed Changes
1.1 Higher Tax Instalment Thresholds: Fewer Taxpayers May Need to Make Quarterly Payments
Currently, individuals who receive income that is not subject to sufficient tax withholding, such as self-employment income, rental income, investment income, dividends or capital gains, may be required to make quarterly income tax instalments to the Canada Revenue Agency (CRA).
Under the existing rules, the instalment threshold is:
- $3,000 for individuals residing outside Quebec;
- $1,800 in federal net tax owing for individuals residing in Quebec.
Budget 2026 proposes to increase these thresholds beginning with the 2028 taxation year:
- Individuals residing outside Quebec and corporations: from $3,000 to $7,500;
- Individuals residing in Quebec: from $1,800 to $4,500.
The thresholds would also be indexed to inflation and rounded to the nearest $500.
It is important to understand that the requirement to make instalments is not determined solely by the amount of tax owing in the current year. Under the existing rules, an individual’s net tax owing must exceed the applicable threshold in the current year and in at least one of the two preceding taxation years.
What does this mean for taxpayers?
For example, consider a self-employed individual in Ontario who consistently owes approximately $5,000 in income tax after filing each annual tax return.
Under the current rules, if the relevant conditions are met, this individual would generally be required to make quarterly instalment payments.
Once the proposed higher threshold takes effect, an annual net tax owing of approximately $5,000 may no longer trigger the quarterly instalment requirement.
This does not mean the taxpayer will pay less tax. It simply changes when the tax needs to be paid. Any remaining balance must still be settled by the applicable payment deadline.
For self-employed individuals and investors whose annual tax owing falls between the current and proposed thresholds, this change could reduce the administrative burden associated with quarterly payments and provide greater flexibility in managing cash flow.
1.2 Eligible Self-Employed Individuals May Make One Annual Instalment Payment
Currently, most individuals required to make income tax instalments must pay four times a year, on the following dates:
- March 15
- June 15
- September 15
- December 15
Individuals whose primary source of income is farming or fishing can already qualify for a different arrangement, allowing them to make one annual instalment payment.
Budget 2026 proposes to extend a similar option to individuals whose primary source of income is from a business, including eligible professional and commission income.
This measure would apply beginning with the 2028 taxation year.
Eligible taxpayers would be able to choose to:
Pay two-thirds of their combined federal and provincial net tax owing for the year by December 31, with the remaining balance due by the applicable balance-due date in the following year.
For example, if an eligible self-employed individual expects to owe $30,000 in total income tax for the year, they could choose to pay $20,000 by December 31, with the remaining $10,000 payable by the following year’s applicable deadline.
This proposal would reduce the need to make multiple instalment payments throughout the year. It may be particularly beneficial for self-employed professionals and individuals whose business income is seasonal or concentrated in certain months.
However, not everyone with self-employment income will automatically qualify. The proposal requires business income to be the individual’s primary source of income. Eligibility will depend on the individual’s overall income circumstances.
1.3 Personal Income Tax Filing and Payment Deadlines Proposed to Change to May 15
Another significant proposal in Budget 2026 concerns the annual personal income tax filing and payment deadlines.
Under the current rules:
- Most individual taxpayers must file their tax returns and pay any outstanding balance by April 30 of the following year.
- Self-employed individuals and their eligible spouses or common-law partners generally have until June 15 to file their returns, although any balance owing must still be paid by April 30.
Budget 2026 proposes to standardize both the filing deadline and the balance-due date to May 15 for all individuals, including self-employed taxpayers and their eligible spouses or common-law partners.
The proposed change would apply beginning with the 2027 taxation year.
If enacted, the filing and payment deadline for the 2027 tax year would therefore be May 15, 2028.
The impact will differ depending on the taxpayer:
For most salaried employees, the deadline would be extended by 15 days compared with the current April 30 deadline.
For self-employed individuals, although the payment deadline would be extended from April 30 to May 15, the filing deadline would move forward from June 15 to May 15.
This means self-employed individuals would need to organize their annual income, business expenses and supporting records earlier to avoid delays in filing.
The standardized deadline may also help coordinate tax filing arrangements for individuals with partnership or trust income.
Important: The proposed changes to filing and payment deadlines would apply from the 2027 taxation year, while the proposed instalment reforms would begin in the 2028 taxation year. These are separate implementation timelines.
- Foreign Asset Reporting (Form T1135): Threshold Proposed to Increase from $100,000 to $200,000
One of the most relevant proposals for Canadian residents with overseas investments is the increase to the foreign asset reporting threshold under Form T1135.
Under the current rules, Canadian tax residents who own specified foreign property with a total cost amount exceeding $100,000 at any time during a taxation year are generally required to file Form T1135, Foreign Income Verification Statement, with the CRA.
Budget 2026 proposes to increase the reporting threshold from $100,000 to $200,000.
The threshold for simplified reporting under Part A of Form T1135 would also increase from less than $250,000 to less than $500,000.
These changes are proposed to apply to taxation years or fiscal periods ending after 2026. For individuals with a calendar-year reporting period, the new thresholds would generally apply beginning with the 2027 taxation year.
Example:
Suppose an Ontario resident owns specified foreign property with a total cost amount of $150,000.
Under the current rules for the 2026 taxation year, this individual would generally be required to file Form T1135.
If the proposed $200,000 threshold takes effect for the 2027 taxation year and the total cost amount of the individual’s specified foreign property remains at $150,000, the individual would generally no longer be required to file Form T1135.
Although this proposal would reduce the reporting burden for some taxpayers, an increase in the reporting threshold does not eliminate the obligation to report foreign income.
There are several important points that foreign asset holders should understand.
2.1 The Reporting Threshold Is Based on Cost Amount, Not Current Market Value
Form T1135 reporting is generally based on the tax cost amount of specified foreign property, rather than its current fair market value.
The cost amount may be determined with reference to the property’s adjusted cost base (ACB) and other applicable tax rules.
For example, an individual owns a foreign rental property that was originally purchased for the equivalent of $80,000. Its current market value has since increased to $300,000.
Assuming its relevant tax cost amount remains $80,000 and the individual has no other specified foreign property, the increase in market value alone would not trigger a T1135 filing requirement.
However, rental income generated by the property must still be reported for Canadian income tax purposes. Any taxable capital gain arising from a future sale must also be reported.
Where property is inherited, gifted or acquired before an individual becomes a Canadian tax resident, the applicable tax cost may differ from the original purchase price. These situations require a separate review.
2.2 The Threshold Applies to the Combined Cost of All Specified Foreign Property
The T1135 reporting threshold is not assessed separately for each foreign asset. Instead, the total cost amount of all specified foreign property must be considered.
For example, an individual holds the following foreign assets during the 2026 taxation year:
| Foreign Asset | Cost Amount |
| Foreign bank deposits | $30,000 |
| Foreign shares | $40,000 |
| Foreign rental property | $50,000 |
| Total | $120,000 |
Although none of the individual assets exceeds $100,000, their combined cost amount is $120,000.
Under the current rules, the individual would generally be required to file Form T1135 for the 2026 taxation year.
If the proposed threshold of $200,000 takes effect in 2027 and the total cost amount remains $120,000, the individual would generally no longer have a T1135 filing obligation.
It is also important to remember that the reporting test considers asset holdings throughout the taxation year, not just the balance on December 31.
Selling part of an investment before year-end does not automatically eliminate a reporting obligation that arose earlier in the year.
2.3 What Types of Foreign Assets Must Be Reported?
Common examples of specified foreign property include:
- Bank deposits held outside Canada;
- Shares issued by non-resident corporations, including U.S. stocks;
- Foreign investment funds and certain other overseas investments;
- Foreign rental properties and other income-producing real estate;
- Debts owed to the taxpayer by non-residents and certain foreign bonds.
One commonly overlooked point is that U.S. stocks held in a regular non-registered investment account with a Canadian brokerage firm generally still qualify as specified foreign property.
This is because the classification of a share depends on the tax residency of the issuing corporation, not simply the location of the brokerage firm or investment account.
On the other hand, the following assets are generally excluded from T1135 reporting:
- Foreign residences and other personal-use property used primarily for personal purposes;
- Foreign investments held within qualifying registered plans, such as RRSPs and TFSAs;
- Property used exclusively in an active business;
- Shares issued by Canadian-resident corporations;
- Investments in qualifying Canadian mutual funds.
The actual use of foreign real estate is particularly important. Where a property is used partly for personal purposes and partly for rental purposes, its reporting treatment should be assessed based on the specific circumstances and applicable tax rules.
2.4 How Are Foreign Assets Valued for New Canadian Tax Residents?
For individuals who have recently become Canadian tax residents, there is an important rule regarding the tax cost of certain assets owned before entering the Canadian tax system.
Generally, when an individual becomes a Canadian tax resident, certain capital property owned at that time is deemed to have been acquired at its fair market value (FMV) on the date residency begins.
For example, an individual becomes a Canadian tax resident in 2026 and owns a foreign investment property with a fair market value of $300,000 at that time.
Although the property may have been purchased many years earlier at a much lower price, its Canadian tax cost for future capital gains purposes would generally be based on its fair market value when the individual became a Canadian tax resident.
Under the current T1135 rules, individuals are generally exempt from filing Form T1135 for their first year of Canadian tax residency.
Beginning with the second year, they must assess their filing obligation using the applicable reporting threshold.
Therefore, an individual who first becomes a Canadian tax resident in 2026 would generally assess their 2027 T1135 filing obligation using the proposed $200,000 threshold, if the change is enacted.
Newcomers should retain supporting documentation, including foreign property valuations, bank balances, investment statements and other relevant asset records as of their date of becoming Canadian tax residents.
These records may be important not only for future T1135 reporting, but also for calculating capital gains when foreign assets are eventually sold.
2.5 No T1135 Filing Requirement Does Not Mean Foreign Income Is Tax-Free
This distinction is particularly important.
Form T1135 is an information reporting form for foreign assets. It is not a tax return for calculating foreign income tax.
Canadian tax residents are generally required to report their worldwide income, regardless of whether their foreign assets meet the T1135 reporting threshold.
Examples of foreign income that may need to be reported include:
- Interest earned on foreign bank deposits;
- Dividends received from foreign shares;
- Rental income from overseas properties;
- Taxable capital gains from the sale of foreign investments.
Where foreign income tax has already been paid, the taxpayer may also be eligible to claim a Foreign Tax Credit, subject to the applicable rules, to help reduce double taxation.
It is therefore important to distinguish between foreign asset reporting, foreign income reporting and foreign tax credits. The absence of a T1135 filing requirement does not eliminate other Canadian tax obligations.
- Other Notable Tax Proposals in Budget 2026
In addition to the changes to personal tax filing and foreign asset reporting, Budget 2026 includes several other proposals relevant to families, investors and individual taxpayers.
3.1 Canada Caregiver Credit Proposed to Become Refundable
The Canada Caregiver Credit is currently a non-refundable tax credit.
Budget 2026 proposes to make the credit refundable beginning with the 2027 taxation year.
This means eligible caregivers may receive the benefit even if they have little or no income tax payable against which to claim the credit.
The proposed change is intended to provide more meaningful financial support to qualifying caregivers.
3.2 Canada Growth Incentive: Proposed Capital Gains Exemption of up to $15 Million
Budget 2026 proposes a new Canada Growth Incentive (CGI) capital gains exemption.
Under the proposal, eligible Canadian-resident individuals could claim an exemption on capital gains arising from the disposition of qualifying shares, up to a limit of $15 million per individual, per qualifying business.
However, the proposed exemption is subject to significant eligibility requirements.
Key conditions include:
- Shares must be newly issued by a qualifying Canadian-controlled private corporation (CCPC);
- Shares must be issued after November 5, 2026, and meet the applicable timing requirements;
- The individual must be at least 18 years old when acquiring the shares;
- Shares must be issued in exchange for cash or qualifying employment services;
- The shares must generally be held for at least 36 consecutive months;
- The corporation must satisfy requirements relating to its assets and the conduct of a qualifying active business primarily in Canada.
The proposal specifically excludes a number of industries, including accounting, legal, medical, engineering, architectural and consulting services, as well as agriculture, fishing, forestry, mining, financial services, insurance, utilities, real estate, food and accommodation, arts, recreation, entertainment, and franchising businesses.
The exemption is intended primarily for qualifying newly issued shares and does not apply to shares already held by existing shareholders.
The detailed eligibility requirements, including the corporation’s asset composition, business activities, share issuance and holding period, will need to be carefully reviewed before relying on this exemption.
3.3 Longer Deadline Proposed for Filing a Notice of Objection
Currently, taxpayers generally have 90 days from the date a Notice of Assessment is sent by the CRA to file a Notice of Objection.
Special timing rules also apply to individuals and graduated rate estates.
Budget 2026 proposes to extend the objection period as follows:
- Most taxpayers: one year after the Notice of Assessment is sent;
- Individuals and graduated rate estates: the later of one year after the Notice of Assessment is sent and two years after the tax return filing deadline for the taxation year being assessed.
Under the proposed rules, taxpayers would no longer need to apply for an extension of time because the existing extension application process would be eliminated.
This measure is proposed to apply to assessments sent on or after the date that is three months after Royal Assent of the enacting legislation.
3.4 Certain Administrative Tax Penalties Proposed to Increase
Budget 2026 also proposes adjustments to certain fixed-amount administrative penalties to account for inflation, with further adjustments planned every five years.
For certain repeated violations, penalties may increase to twice the original amount, while individuals and small businesses would be subject to applicable base amounts.
These proposals serve as another reminder that taxpayers should not only pay attention to filing and payment deadlines, but also respond promptly to CRA correspondence, maintain adequate supporting records and meet applicable information reporting requirements.
- What Should Taxpayers Do Now?
Although some of the proposed measures are not expected to take effect until 2027 or 2028, taxpayers can take steps now to prepare.
If you earn self-employment or business income:
Maintain organized records of business income and expenses, regularly estimate your annual tax liability and plan instalment payments according to your cash flow.
If you own foreign bank accounts, investments or real estate:
Keep records of acquisition costs, transaction history, bank statements and relevant foreign exchange information. For foreign real estate, retain purchase documents, related expenses and supporting property valuations.
If you are a newcomer or hold cross-border assets:
The date you become a Canadian tax resident may have a significant impact on the tax cost of your foreign assets and the calculation of future capital gains. It is important to document asset valuations and ownership information at the time your Canadian tax residency begins.
If you receive a CRA Notice of Assessment or audit correspondence:
Review the notice carefully and pay attention to applicable deadlines. Where necessary, seek professional assistance early to avoid missing objection deadlines or requests for supporting documentation.
Conclusion
Budget 2026 proposes several important changes affecting personal tax filing, income tax instalments, foreign asset reporting and taxpayer objection rights.
Among these proposals, the increased T1135 reporting threshold and the proposed standardized May 15 filing and payment deadline are particularly relevant to individuals with foreign assets and self-employment income.
It is important to remember that budget proposals do not automatically become law. For the upcoming 2026 personal income tax filing season, taxpayers must continue to follow the existing tax legislation and CRA requirements.
Tax rules continue to evolve, but maintaining accurate financial records, documenting asset cost amounts and planning ahead remain essential to effective tax management.
If you have self-employment income, corporate investments, foreign real estate or cross-border assets, a review of your individual circumstances can help identify potential tax obligations and planning opportunities.
AYL CPA Professional Corporation
This article is based on the federal Budget 2026 released by the Department of Finance Canada on November 5, 2026, and related proposed tax legislation. It is intended for general informational purposes only and does not constitute tax advice for any specific individual or business. All proposed measures remain subject to the final legislation receiving Royal Assent and the applicable guidance issued by the Canada Revenue Agency (CRA).