Search
  • Peter Wiesner

Canadian Federal Budget April 7th, 2022 - Quick Highlights



April 7th, 2022


The Minister of Finance issued her budget today at 4pm in Ottawa, Ontario and the highlights are as follows;


Lots of spending programs included within the budget with a $113 Billion annual deficit projected as part of the price tag to the continued spending.

Note that a 1% per cent increase in interest rates will increase this budgetary deficit balance by $5.1 billion per year.


Measures include:


Dental Care for Some

$5.3 billion allocated to provide dental care for Canadians with family incomes of

less than $90,000 annually, starting with under 12 years-olds in 2022,

expanding to under 18 years-olds, seniors and persons living with a

disability in 2023, with full implementation by 2025


A Housing focus


Multigenerational Home Renovation Tax Credit

Many Canadians have traditions of living together in multigenerational homes,

with grandparents, parents, and children under one roof. For some families

across the country, having different generations living together—an elderly

grandparent with their daughter’s family or a son with a disability with their

parents—can be an important way for them to care for each other.

To support these families, Budget 2022 proposes to introduce a

Multigenerational Home Renovation Tax Credit, which would provide up to

$7,500 in support for constructing a secondary suite for a senior or an adult

with a disability.

Starting in 2023, this refundable credit would allow families to claim 15 per cent

of up to $50,000 in eligible renovation and construction costs incurred in order

to construct a secondary suite.


A Tax-Free First Home Savings Account

As home prices climb, so too does the cost of a down payment. This represents

a major barrier for many looking to own a home—especially young people.

To help Canadians save for their first home:

Budget 2022 proposes to introduce the Tax-Free First Home Savings

Account that would give prospective first-time home buyers the ability to

save up to $40,000. Like an RRSP, contributions would be tax-deductible,

and withdrawals to purchase a first home—including investment income—

would be non-taxable, like a TFSA. Tax-free in, tax-free out.

The government intends to work with financial institutions to ensure that a Tax-

Free First Home Savings Account could be opened and contributed to in 2023.

Contributions

The lifetime limit on contributions would be $40,000, subject to an annual

contribution limit of $8,000. The full annual contribution limit would be

available starting in 2023.

Unused annual contribution room could not be carried forward, meaning an

individual contributing less than $8,000 in a given year would still face an

annual limit of $8,000 in subsequent years.

An individual would be permitted to hold more than one FHSA, but the total

amount that an individual contributes to all of their FHSAs could not exceed

their annual and lifetime FHSA contribution limits.


Doubling the First-Time Home Buyers’ Tax Credit

The government recognizes that the significant closing costs associated with

purchasing a home can be a hurdle for first-time home buyers, and the First-Time

Home Buyers’ Tax Credit is intended to provide support to Canadians buying their

first home whether it be in a rural, suburban, or urban community.

Budget 2022 proposes to double the First-Time Home Buyers’ Tax Credit

amount to $10,000. The enhanced credit would provide up to $1,500 in

direct support to home buyers.

This measure would apply to homes purchased on or after January 1, 2022.


Doubling the Home Accessibility Tax Credit

Seniors and persons with disabilities deserve the opportunity to live and age

at home, but renovations and upgrades that make homes safe and accessible

can be costly. The Home Accessibility Tax Credit provides support to offset

some of these costs. But with the increased costs of home renovations, many

seniors and persons with disabilities are often finding it hard to afford the home

improvements that would allow them to continue living safely at home.

Budget 2022 proposes to double the qualifying expense limit of the

Home Accessibility Tax Credit to $20,000 for the 2022 and subsequent tax

years.


This will mean a tax credit of up to $3,000—an increase from the

previous tax credit of up to $1,500—for important accessibility renovations

or alterations.

Doubling the credit’s annual limit will help make more significant alterations

and renovations more affordable, including:

• The purchase and installation of wheelchair ramps, walk-in bathtubs, and

wheel-in showers;

• Widening doorways and hallways to allow for the passage of a wheelchair

or walker;

• Building a bedroom or a bathroom to permit first-floor occupancy; and

• Installing non-slip flooring to help avoid falls.


Property Flippers

Property flipping—buying a house and selling it for much more than what was

paid for it just a short time prior—can unfairly lead to higher housing prices,

and some people who engage in property flipping may be improperly reporting

their profits to pay less tax.

Budget 2022 proposes to introduce new rules to ensure profits from

flipping properties are taxed fully and fairly. Specifically, any person

who sells a property they have held for less than 12 months would be

considered to be flipping properties and would be subject to full taxation

on their profits as business income.


Exemptions would apply for Canadians who sell their home due to certain life circumstances, such as a death, disability, the birth of a child, a new job, or a divorce. Exemptions will be

set in forthcoming rules and Canadians will be consulted on the draft

legislative proposals.


This new measure will ensure that investors who flip homes pay their fair share,

while protecting the current, vitally important, principal residence exemption for

Canadians who use their houses as homes.

The measure would apply to residential properties sold on or after January 1, 2023.


Assignment Sales and HST

To address these issues, Budget 2022 proposes to make all assignment

sales of newly constructed or substantially renovated residential housing

taxable for GST/HST purposes, effective May 7, 2022.


Cutting Taxes for Canada’s Growing Small Businesses

The government provides a range of incentives to encourage investments in

growing businesses.

Small businesses currently benefit from a reduced federal tax rate of 9 per

cent on their first $500,000 of taxable income (add 3.2% for Ontario) for a total of 12.3%, compared to a general federal corporate tax rate of 15 per cent. A business no longer has access to this lower rate once its level of capital employed in Canada reaches $15 million.

However, phasing out access to the lower tax rate too quickly—and then

requiring a small business to pay more in tax—can discourage some businesses

from continuing to grow and create jobs.

Budget 2022 proposes to phase out access to the small business tax rate

more gradually, with access to be fully phased out when taxable capital

reaches $50 million, rather than at $15 million.


The new range would be $10 million to $50 million (see below).

This change would allow more medium-sized CCPCs to benefit from the small

business deduction.


Furthermore, it would increase the amount of qualifying

active business income that can be eligible for the small business deduction.

For example, under the new rules:

Tax Measures: Supplementary information

• a CCPC with $30 million in taxable capital would have up to $250,000 of

active business income eligible for the small business deduction, compared

to $0 under current rules; and

• a CCPC with $12 million in taxable capital would have up to $475,000 of

active business income eligible for the small business deduction, compared

to up to $300,000 under current rules.

This measure would apply to taxation years that begin on or after Budget Day.


Banks and Insurance Tax Increase


The federal government is accordingly proposing two measures to increase taxes

on large financial institutions.


Budget 2022 proposes to introduce a temporary Canada Recovery

Dividend, under which banking and life insurers’ groups (as determined

under Part VI of the Income Tax Act) will pay a one-time 15 per cent tax on

taxable income above $1 billion for the 2021 tax year. The Canada Recovery

Dividend will be paid in equal installments over five years.


Budget 2022 also proposes to permanently increase the corporate income

tax rate by 1.5 percentage points on the taxable income of banking and

life insurance groups (as determined under Part VI of the Income Tax Act)

above $100 million, such that the overall federal corporate income tax rate

above this income threshold will increase from 15 per cent to 16.5 per cent.


Preventing the Use of Foreign Corporations to Avoid

Canadian Tax

Currently, some people are manipulating the Canadian-controlled private

corporation (CCPC) status of their corporations to avoid paying the additional

refundable corporate income tax that they would otherwise pay on investment

income earned in their corporations. This may be done in a number of

ways, such as by moving a corporation into a foreign low-tax jurisdiction,

by using foreign shell companies, or by moving passive portfolios to an

offshore corporation.

Budget 2022 proposes targeted amendments to the Income Tax Act

to ensure that, for taxation years that end on or after April 7, 2022,

investment income earned and distributed by private corporations that are,

in substance, CCPCs is subject to the same taxation as investment income

earned and distributed by CCPCs.

This measure would increase federal revenues by $4.2 billion over five years

starting in 2022-23.


Student Grants

Making post-secondary education more accessible by doubling the Canada

Student Grants amount until July 2023—meaning up to $6,000 per year in

non-repayable aid for full-time students in need—and by waiving interest

on Canada Student Loans through to March 2023;


Federal Minimum Wage


Introducing a $15 per hour federal minimum wage and legislating 10 days

of paid sick leave to improve the working conditions for the nearly one

million workers in the federally-regulated private sector.

This will increase to $15.55.


EI Sickness Benefits


Increasing the length of Employment Insurance sickness benefits from

15 to 26 weeks, as of summer 2022.


Climate Action Incentive Payments

Increasing Climate Action Incentive payments, and means a family of four will receive, for

2022-2023, $745 in Ontario, $832 in Manitoba, $1,101 in Saskatchewan

and $1,079 in Alberta. This is lower for individuals and couples.


Actual Budget Link


April 7, 2022


Copyright © 2022 by Peter Wiesner CPA


All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise – without prior written permission.


www.taxhome.net




35 views0 comments