Chances are that Budget 2025 won’t have financial advisors scrambling to reconsider clients’ plans or investment holdings. Measures related to private wealth or investment management were mostly “weeding the garden,” said Anthony Messina, president and head of private wealth with Guardian Partners Inc.
As examples, he cited a measure related to the 21-year deemed disposition of trust assets and proposed simplified rules related to the qualified investment regime.
Trusts: 21-year rule strengthened
Generally, trusts are deemed to have disposed of their property at fair market value every 21 years. The budget proposes to broaden the anti-avoidance rule that prevents trusts from deferring the 21-year rule when trust property is directly transferred to another trust on a tax-deferred basis.
Specifically, the rule would be expanded to include indirect transfers. The budget provides the example of a trust distributing property on a tax-deferred basis to a corporate beneficiary owned by a new trust.
“This type of transaction was included in the list of notifiable transactions by the Canada Revenue Agency (CRA), and the CRA had previously stated that it would apply the general anti-avoidance rule,” the Conference for Advanced Life Underwriting said on Tuesday in reaction to the budget. “The proposed change appears to codify the CRA’s position.”
The budget “right-sized” the 21-year rule, Messina said, given the rule’s intention was to provide “21 years and then you pay your taxes.”
The broadened rule would apply to transfers of trust property on or after budget day (Nov. 4).
Qualified investment regime: simplified
The budget also proposes to simplify and harmonize the qualified investment rules applicable to registered plans. First, it proposes to simplify the rules related to registered plan investments in small businesses while maintaining the ability of registered plans to make such investments.
As things stand, two sets of rules exist for registered plan investments in small businesses, with associated duplication and complexity. With the budget’s proposals, the more broadly applicable first set of rules would be maintained and extended to registered disability savings plans, while the second set of rules would be repealed. Changes would apply as of Jan. 1, 2027.
The measure removes “confusion and ambiguity,” Messina said, providing a better understanding of “what can go into your registered accounts when it comes to small business investments.” He added that only “a very small cohort of people are putting private company shares in their registered accounts.”
Second, the budget proposes to replace the registered investment regime with two new categories of qualified investments, which don’t require registration with the CRA: units of trusts subject to National Instrument 81-102 and units of investment funds managed by a registered fund manager under National Instrument 31-103. The measure would be effective as of budget day.
“A little bit of red tape was removed there, and I think that’s probably good,” Messina said.
Budget 2025 further proposes technical legislative amendments, including to consolidate the qualified investment rules for all registered plans, other than deferred profit-sharing plans, into one definition under the Income Tax Act.
Bare trust reporting: deferred
The budget also made clear that bare trusts won’t have to file for the 2025 taxation year. Bare trust reporting will apply to taxation years ending on or after Dec. 31, 2026, the budget says.
Expanded reporting requirements for bare trusts were supposed to kick in for the 2023 tax year. But after the new rules sparked widespread confusion, the CRA announced a filing exemption for bare trusts just days ahead of the tax filing deadline for 2023 returns. Then in October 2024, the CRA announced a filing exemption for bare trusts for the 2024 tax year.
Draft legislation, first published in August 2024, includes a proposed exemption for bare trusts holding less than $250,000 in certain assets, which would apply to many common bare trust situations. It also provides a filing exemption for arrangements in which a taxpayer owns a principal residence and has an adult child or parent on legal title.
While the measures in the draft legislation “would reduce the bare trust arrangements for which filings would be required, many common arrangements would still require T3 income tax returns to be filed, leaving a considerable administrative burden,” CGL Tax, based in Red Deer, Alta., says in its budget commentary.
The budget confirms that the government intends to proceed with the proposals, subject to further changes.
Other measures
Expansion of critical mineral exploration tax credit. This credit equals 30% of specified mineral exploration expenses incurred in Canada and flowed out to investors via flow-through shares. The budget proposes adding 12 additional critical minerals to the current list of 15 eligible ones. It says the expanded credit would apply to exploration expenses renounced under eligible flow-through share agreements entered into after Nov. 4, 2025, and on or before March 31, 2027.
No full resource expense deductions under alternative minimum tax. In a footnote, the budget makes clear that estimates for cancelling the proposed capital gains tax increase include the cancellation of the proposal to fully allow resource expense deductions under the alternative minimum tax.
Clampdown on double claiming with home accessibility tax credit. For the 2026 and subsequent taxation years, the budget proposes that an expense claimed under the medical expense tax credit, which can include certain building or renovation costs to improve access for people with disabilities, can’t also be claimed under the home accessibility tax credit. The measure is projected to have a fiscal impact of $21 million over five years.
The budget noted that claimants of the home accessibility tax credit disproportionately include those aged 65 or older, those who claim the disability tax credit and those with relatively high family incomes.
Introduction of temporary personal support workers tax credit. This refundable credit would equal 5% of eligible earnings up to a maximum of $1,100 per year, and be available for taxation years 2026 to 2030. The credit wouldn’t be available in B.C., Newfoundland and Labrador and the Northwest Territories, given they’re covered by a bilateral agreement with the federal government to increase wages for personal support workers.
Read our full Budget 2025 coverage.
This story was updated on Nov. 13 for clarity.