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.
April 7, 2022
Copyright © 2022 by Peter Wiesner CPA
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