Liberal tax promise tracker, post-2024 budget edition

REITs are not taxed on the income and gains generated in the trust, but instead flow these out to unitholders.

The Liberals first targeted REITs in their 2021 election platform, arguing that “large corporate owners of residential properties such as [REITs] are amassing increasingly large portfolios of Canadian rental housing, making your rent more expensive.”

Despite the reprieve issued last week, the government still “intends to restrict the purchase and acquisition of existing single-family homes by very large, corporate investors,” as stated in the 2024 federal budget. A consultation will begin this year and more details of the government’s plans will be released in the 2024 fall economic statement, the budget said.

The tax community also is waiting for enabling legislation for the increase to the capital gains inclusion rate that’s set to take effect June 25.

Advising clients is difficult without seeing even draft legislation. For example, the government hasn’t indicated how capital losses from previous years may be allocated in 2024 before and after June 25, or whether the $250,000 threshold is indexed.

Legislation won’t come this week, as the House of Commons is off until May 21. In the interim, we review the state of the government’s major tax and estate-planning promises since our last update.

Proposals from the 2024 federal budget in legislation

On April 30, the feds tabled Bill C-69 to implement proposals from the 2024 federal budget. The bill included:

• updates to the alternative minimum tax
• enhancements to the home buyers’ plan
• the Canada Disability Benefit
• autoenrollment to RESPs and the Canada Learning Bond
• provisions related to open and cheaper banking
• clarifications to employee ownership trusts
• tax changes for people who own short-term rentals
• doubling the CPP death benefit for contributors who have no survivors and have never collected CPP
• a softer mandatory disclosure regime

Changes to the underused housing tax (UHT) outlined in the fall economic statement also were included in C-69. A consultation for those changes wrapped up in January. During that consultation, industry organizations and tax professionals called on Ottawa to extend its proposed UHT filing exemption relief back to 2022. However, this change was not made in C-69.*

Budget proposals not in legislation

The capital gains changes, the increase to the lifetime capital gains exemption and the Canadian Entrepreneurs’ Incentive were not in Bill C-69.

Budget proposals moving forward

The Canada Revenue Agency (CRA) confirmed in an email to Investment Executive that its automatic tax filing pilot will commence this summer.

“There are no legislative changes required for the CRA to undertake this pilot,” the agency said. “The CRA plans to consult with stakeholders, community organizations, and tax professionals on the next phase of Canada’s automatic tax filing plan beyond 2025.”

Proposals in Bill C-59

In November, the federal government tabled Bill C-59 to implement measures from the 2023 federal budget and fall economic statement. This bill has reached the report stage in the House of Commons and is being studied by the Standing Senate Committee on National Finance.

The bill contains legislation to implement the following key proposals:

• Changes to intergenerational wealth transfers that occur on or after Jan. 1, 2024. Two updates were made to the August 2023 draft legislation:
  • Parents looking to sell their business to their children no longer need to control the company immediately before the sale.
  • Business owners who sold all or part of their business to their child under the current rules, enacted under Bill C-208 in 2021, won’t be prevented from using the new framework to sell the rest of their business, or another business, to their child.
• Changes to the general anti-avoidance rule (GAAR) were largely unchanged from August 2023. However, the penalty will now be calculated as 25% of the additional tax owing by a taxpayer as a result of the GAAR’s application. This is slightly harsher than the August calculation since it includes the value of refundable tax credits lost when GAAR was applied.
• The 2% share buyback tax that applies as of Jan. 1, 2024, to the annual net value of equity repurchases by public corporations and certain public trusts and partnerships.
• Making planning that results in non-Canadian-controlled private corporation (CCPC) status a reportable transaction so the CRA can assess whether the corporation is a “substantive CCPC.”
• Permitting a qualifying family member to be a successor-holder of an RDSP following the death of that plan’s last remaining holder who was also a qualifying family member.
• Changes to the tax treatment of dividends on Canadian shares for financial institutions, a move that could increase fees for investment products.
• Employee ownership trusts, with an improved tax incentive. The 2024 federal budget also clarified some elements of EOTs, with those changes in Bill C-69.
• Tax changes to retirement compensation arrangements.

Proposals passed into law

No major income tax proposals have passed into law in 2024.

Proposals with no major updates since our last check-in

• The Liberals promised in their 2019 election platform to raise the CPP and QPP survivor’s benefit by 25%, and the matter is being studied as part of the 2022-2024 Triennial Review of the CPP. The 2024 federal budget proposed ending eligibility for survivor pensions if a couple is legally separated, and this change is in Bill C-69.
• The Aging at Home Benefit was proposed in the Liberals’ 2021 election platform. The National Seniors Council presented a report on aging at home to the Minister of Labour and Seniors and the Minister of Health on Sept. 29, 2023. The report is being reviewed.
• These promises from the 2019 election platform were mentioned in Finance Minister Chrystia Freeland’s 2021 mandate letter, and appeared in the 2024 pre-budget report of the Standing Committee on Finance, but did not appear in the budget itself:
  • make the Canada Caregiver Credit refundable
  • implement a Career Extension Tax Credit for working seniors
• A proposal to increase 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 former 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

With files from Rudy Mezzetta

*This article has been updated to state that Bill C-69 did in fact address the UHT.