There were no major surprises in the federal budget tabled on March 28, and the financial services industry received long-awaited clarity on several files. That said, some tax issues still linger.
Before the House of Commons resumes sitting April 17, here’s a look at the status of major government proposals related to tax and estate planning.
Tabled in Parliament
One-time GST credit increase
The Liberals promised a “grocery rebate” in the 2023 federal budget that would be delivered through the GST credit “as soon as possible following the passage of legislation.” On March 29, that legislation — Bill C-46 — was introduced. The maximum credit would be $153 per adult (up from $77), $81 per child and $81 for the single supplement (both up from $40).
Bill C-22, which would create the Canada Disability Benefit, is at second reading in the Senate. The bill does not, however, address many of the benefit’s details, which are to be established through regulation. The benefit will come into force no later than a year after the bill receives royal assent.
New proposals from the 2023 budget
None of the below have been tabled in legislation, but all appear in the Notice of Ways and Means in the 2023 budget:
- Employee ownership trusts
- Tax changes to retirement compensation arrangements
- Boosting the limit on allowable EAP withdrawals from RESPs to $8,000 from $5,000
- Allowing divorced or separated parents to open joint RESPs
- Including siblings as “qualifying family members” for RDSPs
- Extending a temporary measure allowing qualifying family members to open an RDSP for an adult beneficiary to Dec. 31, 2026. The measure was set to expire at the end of 2023.
Proposals with updates in the 2023 budget
Free, automatic tax filing
The 2023 federal budget proposed that the Canada Revenue Agency pilot a new automatic filing service intended to help vulnerable Canadians receive benefits beginning in 2024. This concept was first promised in the 2020 speech from the throne.
All of the below appear in the budget’s Notice of Ways and Means, but corresponding legislation has not yet been tabled.
Minimum tax for high earners
An overhaul to the alternative minimum tax was first floated in the 2022 federal budget, and the 2023 budget fleshed it out. The proposed regime would raise the AMT rate to 20.5% from 15%, limit what the government called “excessive use of tax preferences,” and raise the $40,000 exemption amount to the start of the fourth federal tax bracket ($173,000 in the 2024 taxation year). The changes would come into force for the 2024 tax year.
Intergenerational wealth transfer
Bill C-208 was a private member’s bill meant to facilitate “genuine” intergenerational transfers of small businesses, farms and fishing corporations. It was enacted on June 29, 2021, but the federal government has said the bill has “insufficient safeguards” to prevent surplus stripping.
To address that, the budget imposed new conditions for an intergenerational business transfer to qualify as genuine. The conditions could be met using either “immediate” or “gradual” intergenerational transfer options. The proposed measures would apply to transfers on or after Jan. 1, 2024.
As announced in the 2022 fall economic statement, a 2% share buyback tax will apply as of Jan. 1, 2024, to the annual net value of equity repurchases by public corporations and certain public trusts and partnerships. Gross repurchases of less than $1 million are exempt.
Proposals noted in the 2023 budget with no further details
The 2023 federal budget confirmed the government intends to proceed with the below measures, but they are not yet law:
- Draft legislation released in August proposes to make planning that results in non-CCPC status a reportable transaction so the CRA can assess whether or not the corporation is a “substantive CCPC.”
- As of the 2023 tax year, issuers of RRSPs and RRIFs will be required to annually report the fair market value of all property held by the plans at the end of the calendar year.
- The government proposed extending its tax on house flippers to assignment sales, with the 12-month holding period for the flipping rule resetting once the taxpayer who entered the purchase and sale agreement takes ownership of the property.
Proposals with no major updates since our last check-in
- The Aging at Home Benefit was first proposed in the Liberals’ 2021 election platform. On that front, the National Seniors Council launched a consultation on March 20 regarding how to support aging at home. It closes April 14.
- Phase 2 of a consultation on modernizing the employment insurance system, as proposed in the 2020 speech from the throne, closed in July 2022. The consultation’s report was released in September. A Liberal spokesperson told The Canadian Press that EI reform was not included in the federal budget over concern that reforming the program amid a slowing economy could drive up premiums for workers and employers.
- These promises from the 2019 election platform were mentioned in Finance Minister Chrystia Freeland’s 2021 mandate letter, but no progress has been announced since:
- raise the CPP (and QPP) survivor’s benefit by 25%
- make the Canada Caregiver Credit refundable
- implement a Career Extension Tax Credit for working seniors
- Increasing the guaranteed income supplement by $500 for single seniors and by $750 for couples, beginning at age 65, was included in the mandate letter for Seniors Minister Kamal Khera, but no progress has been announced since.
- Nothing has been announced with regards to these 2019 election promises:
- increasing the Canada Child Benefit by 15% for kids younger than one year old;
- making EI maternity and parental benefits tax-exempt
- doubling the child disability benefit