Budget 2026: A Hard Deadline for Objections, and Higher Penalties

The bottom line

The 2026 federal budget, tabled on November 5, makes two procedural changes that matter more than they first appear.

First, the deadline to dispute a CRA assessment would become one year, with no possibility of an extension. That sounds generous, but a missed deadline would be final.

Second, most fixed-dollar penalties would roughly double or triple from 2028, with higher amounts still for larger companies and repeat offenders.

Neither change affects what you owe if you file on time and catch problems early. Both make it more expensive to miss things.

This post is part of our Budget 2026 Insights series. Everything here is proposed, not yet law, and the details could change.

Objections: one year, then the door closes

If you disagree with an assessment or reassessment, you file a notice of objection. Today, corporations have 90 days to do that. If they miss it, they can apply to CRA for an extension within a further year, and the budget itself notes that CRA grants an extension in almost every case.

The budget would replace this with a single, longer deadline and remove the extension.

In effect, the total window for a corporation shrinks from about 15 months to 12. More importantly, there is no safety net once it passes. Taxpayer relief can reduce interest and penalties, but it cannot reduce the tax itself.

The new rules would apply to assessments sent at least three months after the legislation receives Royal Assent. Until then, today's deadlines and extensions still apply.

An example: the notice nobody saw

CRA sends a company a reassessment on March 1, 2029. It goes to the company's CRA online account, and nobody notices it until April 15, 2030. (The example assumes the new rules are in force by then.)

Under today's rules, the company would still have about six weeks to apply for an extension. Under the proposed rules, its right to object would already be gone, whatever the merits of its case.

How to protect yourself

The risk here is not disagreeing with CRA. It is not knowing CRA has written to you. A few simple habits close that gap:

• Check every notice against what was filed. If an assessment or reassessment differs from what you expected, send it to us right away so we have time to respond.
• Watch your CRA online accounts. Many notices now arrive only in My Account or My Business Account, with an email that is easy to miss.
• Make sure we can see your account, but don't rely on it. If we are authorized as your representative, we can view your CRA correspondence. However, CRA does not always notify us when a new notice is posted, so having access does not mean we will see every notice. Please send us anything you receive from CRA, and ask us if you are not sure we are set up.
• Keep your mailing and email addresses current with CRA, especially after a move or a change of bookkeeper.

The objection deadline matters for another reason. The budget would also let CRA report unpaid tax debts over $50,000 to credit bureaus, starting on Royal Assent, but only once objection and appeal rights have run out. A missed objection deadline could bring that point forward.

Penalties: what is changing

Some fixed-dollar penalties have not changed since the 1980s or 1990s, and one dates from 1927. The budget makes four changes:

• Catch-up for inflation. Most older fixed-dollar penalties would roughly double or triple.
• Scaled to size. Certain penalties would be three times the base amount for medium-sized corporations and partnerships, and eight times for large ones. Individuals and smaller businesses stay at the base amount.
• Repeat failures. New penalties, generally double the base amount, would apply where the same type of failure happened in any of the three previous years and the taxpayer did not fix it after a CRA notice or demand.
• Indexing. The amounts would be adjusted for inflation every five years, starting in 2033.

Most of these changes apply to failures after 2027, so 2028 is the first year affected.

What is not changing: the standard late-filing penalty on a return with tax owing, which is a percentage of the unpaid tax.

The penalties most likely to affect you

For size-scaled penalties, the amounts would be:

Daily amounts are capped at 100 days. Medium-sized means a corporate group with more than $10 million and up to $50 million of taxable capital in Canada, or a partnership with $2 million to under $10 million in revenue. Large is above those levels.

Other amounts owner-managers should know:

• Late section 85 election (Form T2057 or T2058), and other late-filed elections CRA accepts: $300 for each month late, up to $24,000. Today it is $100 a month, up to $8,000. The alternative calculation based on the value transferred stays the same, and the lower of the two applies.
• Late T-slips such as T4s and T5s: the greater of $150 and a daily amount based on how many slips are late, starting at $15 a day for 50 or fewer.
• Not giving your SIN or business number to someone who needs it for a slip: $300 per failure.
• Not giving your tax ID to your bank when asked for international reporting: $1,000 per failure.
• Partnership information returns: a repeat failure after a demand would cost $300 per partner for each month, up to 24 months.
• Gross negligence: a minimum penalty of $300.

None of these apply if you file on time and complete forms fully. They add up quickly when you don't.

What if no tax is owing?

The late-filing penalty on a tax return is a percentage of the unpaid tax, and the budget does not change that. If no tax is owing, or you are due a refund, there is no late-filing penalty, even after CRA has sent a demand to file.

That does not make a demand safe to ignore:

• CRA can estimate your income. If you don't file, CRA can issue an assessment based on its own estimate, which can turn an expected refund into a balance owing. Under the proposed rules, you would have one year to object to it, with no extension.
• Refunds and benefits are at risk. An individual's refund can only be paid if the return is filed within 10 years, and benefits such as the GST/HST credit and the Canada Child Benefit depend on a filed return.
• Ignoring a demand is an offence. CRA can prosecute for failing to file a return it has demanded, whether or not any tax is owing.
• Inactive companies still have to file. A Canadian corporation must file a T2 return every year it exists, even with no income. If a company is no longer used, keep filing nil returns or talk to us about dissolving it.
• Non-resident corporations face a new minimum. From the 2028 tax year, a non-resident corporation that files late would pay at least the greater of $300 and $75 a day, up to 100 days, even if it owes no tax.

What to do now

1. Send us every notice of assessment or reassessment as soon as it arrives, and tell us right away if it differs from what was filed.
2. Check your CRA online accounts regularly yourself, and confirm we are authorized to see them.
3. Get us slip and election information on time. Late T-slips and late section 85 elections will cost more from 2028.
4. Answer CRA notices and demands promptly. The new repeat-failure penalties only apply after a notice goes unanswered.
5. Carrying a tax balance over $50,000? Set up a payment arrangement before credit bureau reporting begins.

Most of this still has to be legislated, and we will update you as the details firm up. On our side, we are reviewing how we track CRA correspondence and filing deadlines so nothing slips through.

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Michael Sadovnick, CPA

This post is general information based on the 2026 federal budget proposals, which may change before becoming law. It is not tax advice for your situation. Please contact us before acting.

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