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December 14th Canada Economic Update -Federal Highlights

Updated: Dec 18, 2021



Today (December 14th, 2021) the Federal Minister of Finance has issued her economic statement /update with the following highlights;


DEFICIT ON THE DECLINE


The document forecasts that the annual deficit in 2021-22 will drop to $144.5 billion, down from $154.7 billion estimated in the spring budget.


In the 2022-23 fiscal year, the deficit is projected to sit at $58.4 billion, down slightly from the earlier predicted $59.7 billion.


Tax Revenues

Total tax revenues, including that from excise taxes and import duty revenues, will reach $312.1 billion by the end of the 2021-22 fiscal year, climbing to $391 billion by 2026-27.


Spending Items

  • The Economic and Fiscal Update proposes new measures to see Canadians through the pandemic and support a robust and resilient recovery. These investments include:

  • $1.7 billion to increase access to rapid testing supplies across Canada, helping to identify cases early, break the chain of transmissions, and reduce outbreaks.

  • $2 billion to procure lifesaving COVID-19 therapeutics and treatments.

  • $100 million through the Safe Return to Class Fund and $10 million for First Nations on-reserve schools to improve ventilation in schools and protect students, teachers, school staff, and parents from outbreaks.

  • The government also proposes to expand the Eligible Educator School Supply Tax Credit so teachers can claim a refundable tax credit worth 25 per cent (up from 15 per cent) of up to $1,000.

* $70 million to support ventilation projects in public and community buildings like hospitals, libraries, and community centres.

  • The proposed new Small Businesses Air Quality Improvement Tax Credit of 25 per cent of the cost of upgrading ventilation systems and air filtration, up to $10,000 per location and $50,000 in total.

  • $60 million to support workers in Canada’s live performance industry through the new temporary Canada Performing Arts Workers Resilience Fund.

  • One-time payments to alleviate financial hardship of Guaranteed Income Supplement (GIS) and Allowance recipients who received the Canada Emergency Response Benefit (CERB) or the Canada Recovery Benefit (CRB) in 2020.

  • Provide debt relief to students who need to repay the Canada Emergency Response Benefits they were not eligible for by proposing to offset it with the amount they would have been eligible for under the Canada Emergency Student Benefit.

  • $50 million to help relieve supply chain congestion in Canada by launching a call for proposals under the National Trade Corridors Fund to assist Canadian ports with the acquisition of cargo storage capacity and other measures to alleviate congestion.

  • $85 million to reduce backlogs in Canada’s immigration system, speed up the process of citizenship, reunite families, and welcome people who can help address Canada’s labour shortages.

Tax items included;

  • Eligible Educator School Supply Tax Credit: This refundable tax credit is proposed to increase from 15% to 25%, effective for 2021. Some durable goods and electronic devices would be added as eligible supplies.

Enhanced Support for Teachers Under current rules, teachers and early childhood educators may claim a 15-per-cent refundable tax credit based on an amount of up to $1,000 in expenditures made in a taxation year for eligible supplies.


Eligible supplies must be purchased for use in a school or in a regulated child care facility for the purpose of teaching or facilitating students’ learning. Eligible supplies include the following durable goods: books; games and puzzles; containers (such as plastic boxes or banker boxes); and educational support software. Eligible supplies also include consumable goods, such as construction paper for activities, flashcards or activity centres.


For the cost of supplies to qualify for the credit, employers are required, at the request of the Minister of National Revenue, to certify that the supplies were purchased for the purpose of teaching or facilitating students’ learning. Individuals making claims are required to retain their receipts for verification purposes.

The credit may not be claimed in respect of an amount that has already been claimed under any other provision of the Income Tax Act.


Electronic devices are not in general included in the list of prescribed durable goods for the purposes of the Eligible Educator School Supply Tax Credit, and while the Canada Revenue Agency has taken the position that an online classroom may be considered an extension of the physical school, this position would not generally apply outside the context of the COVID-19 pandemic.


The 2021 Fall Economic Statement proposes to make the tax credit more generous by increasing the rate of the refundable tax credit to 25 per cent. Additionally, this measure would clarify and broaden the rules regarding the locations where teaching supplies are permitted to be used by removing the requirement that teaching supplies must be used in a school or regulated child care facility to be eligible.


This measure would also expand the list of eligible durable goods to include certain electronic devices. The following items would be added to the list of prescribed durable goods: • calculators (including graphing calculators); • external data storage devices; • web cams, microphones and headphones; • wireless pointer devices; • electronic educational toys; • digital timers; • speakers; • video streaming devices; • multimedia projectors; • printers; and • laptop, desktop and tablet computers, provided that none of these items are made available to the eligible educator by their employer for use outside of the classroom.


At the request of the Minister of National Revenue, an eligible educator making a claim would be required to provide a certificate from their employer attesting to the eligible supplies, including the additional conditions with respect to laptop, desktop and tablet computers. This measure would apply to the 2021 and subsequent taxation years

  • Small Business Air Quality Improvement Tax Credit: The credit is proposed at 25% of an eligible entity’s qualifying expenditures (to a maximum of $10,000 in expenditures per qualifying location and a maximum of $50,000 across all qualifying locations). Qualifying expenditures would include expenses directly attributable to the purchase, installation, upgrade, or conversion of mechanical heating, ventilation and air conditioning (HVAC) systems, as well as the purchase of devices designed to filter air using high-efficiency particulate air (HEPA) filters, the primary purpose of which is to increase outdoor air intake or to improve air cleaning or air filtration. This would apply to expenditures incurred between September 1, 2021 and December 31, 2022.

  • Underused Housing Tax: This tax is proposed to be effective for the 2022 calendar year. Expanded exemptions for significant use by the owner’s family and rural vacation/recreational properties personally used by the owner for at least 4 weeks were also proposed.

  • Simplified home office deduction method: It is proposed that the simplified rules for deducting home office expenses would be extended and the temporary flat rate method would be increased to $500 annually. This would apply to the 2021 and 2022 tax years.

  • Expanded access to the Northern Residents’ Deduction (NRD): The government reiterated their intention to bring forward legislation to extend the NRD so eligible individuals can claim up to $1,200 in eligible travel expenses starting “next month.”

  • Pollution pricing – payments to farmers: It is proposed that fuel charge proceeds will be directly returned to farming businesses in backstop jurisdictions (Ontario, Manitoba, Saskatchewan, and Alberta) via a refundable tax credit, starting for the 2021-22 fuel charge year.

  • GIS support: It is proposed that one-time payments will be made to alleviate the financial hardship of GIS and Allowance recipients who received the CERB or CRB in 2020. The amount of payment was not provided.

  • CEBA repayment: It is proposed that legislation would be brought forward to extend small businesses’ deadline for the repayment of Canada Emergency Business Account loans.

  • EI Seasonal Workers Pilot Project: The government intends to ensure that seasonal workers who received pandemic benefits can still qualify for the EI Seasonal Workers Pilot Project.

  • Luxury tax: Budget 2021 proposed to introduce a tax on the sale of select luxury goods (new cars and aircraft with a retail sale price over $100,000 and to new boats over $250,000). Draft legislation, including details on coming into force, will be released in early 2022.

  • First Nations: The federal government revealed Monday that in the Fall economic statement it will announce $40-billion for First Nations child welfare compensation and long-term reform.

Many of the tax items above are extracts from Video Tax News which have been republished with their permission.


If any questions or comments arise, please contact Peter at 905-898-3355


NOTICE TO READERS

This economic statement update has been prepared for educational purposes only on December 14, 2021.


Peter Wiesner CPA, CA, Licensed Public Accountant nor anyone involved in the preparation or distribution of this tax planning tips any contractual, tortuous or other form of liability for its contents or for any consequences arising from its use.


Please contact Peter Wiesner CPA, CA at 905-898-3355 before implementing any tax strategies or indirect advice resulting from this information.


Copyright © 2021 by Peter Wiesner CPA, CA


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.

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