The liberal government is making some changes to the capital gains tax exemption applied when an employer sells their shares, but advocates say this exemption is insufficient.

The federal budget announced in April an increase in the "inclusion rate" subject to tax on capital gains - the profits individuals or companies make from selling an asset such as stocks or a second home.

The new rules increased the inclusion rate from half to two-thirds on capital gains over $250,000 for individuals, and on all capital gains realized by corporations and trust funds.

The budget also announced a reduction in the inclusion rate when an individual sells shares they own in their company. This exemption is called the "Canadian Entrepreneurs Incentive," and it reduces the inclusion rate on capital gains to 33% with a lifetime maximum limit of $2 million.

However, last Monday, the government announced that it would make changes to the business exemption by expanding its eligibility and accelerating its rollout.

The budget stated that only the founding members of the company who own 10 percent or more of its shares would be eligible for the exemption. The government is now working to eliminate the founder requirement and reduce the ownership threshold to 5 percent.

The amount of time the owner must be actively involved in the daily operations of their business to benefit from the exemption has been reduced from five years to three years.

It was also previously intended that the maximum of $2 million would be phased in over ten years, but it is now set to be phased in over five years - increasing by $400,000 per year.

Additionally, the sale of fishing and agricultural properties will now be eligible for the exemption.