Transcript: Investment community seeking clarity in Carney’s first budget

The impact on individuals.

RC: For individuals, we have a new personal support workers tax credit, which has a value up to $1,100 that will kick in in 2026 and end in 2030. This will be applicable for workers whose main employment duty is to help patients with activities of daily living and mobilization. So this will be a new credit coming out from this budget. We also have a Top-Up Tax Credit, which is meant to reduce the impact from the middle class tax cut that was announced in May of 2025. The impact of this tax cut, actually reduced the value of non-refundable tax credits, which is based on the lowest income tax rate. So the Top-Up Tax Credit allows for certain individuals claiming large amounts of non-refundable tax credits to still benefit. And this will be applicable for 2025 to 2030. The last things for individuals is there are rules to prevent what’s called the double dipping of eligible expenses that’s used to claim the Home Accessibility Tax Credit and the Medical Expense Tax Credit. So for 2026 onwards, eligible expenses that are claimed on one cannot be made for the other.

The impact on trusts

RC: The application of enhanced reporting rules for bare trusts is once again deferred, this time until 2026. This will be the third time this has been deferred. It remains to be seen when it will actually get implemented. For the 21-year rule that relates to trusts, there is an expansion of the anti-avoidance rules to prevent indirect transfers of property to a new trust to bypass the 21-year rule. Essentially, the 21-year rule is you need to take the property out from the trust within the 21 years, otherwise, there’s a deemed disposition for tax. The new rules narrows the ability to transfer properties and bypass the 21-year rule.

The impact on business owners

RC: For business owners, there are new measures to allow for immediate expensing of manufacturing and processing buildings, and this is to help encourage investments into facilities in Canada. This will be paired with the accelerated investment incentives that are going to be reintroduced, which allows for enhanced deductions on qualifying machinery and equipment to, again, encourage investments in Canada. The immediate expensing of manufacturing and processing buildings, as well as the accelerated investment incentives are implemented in response to similar measures in the One Big, Beautiful Bill from the United States. The budget is also moving forward with legislation to formalize increasing the lifetime capital gain exemptions to $1.25 million, as previously announced. These are measures from the government to encourage further investments into Canada, as well as having incentives for business owners to invest and sell their business in Canada.

Canceled and excluded items

RC: Perhaps what’s most interesting in this budget is what’s been canceled and excluded. These include the Canadian Entrepreneurs’ Incentive, which was supposed to provide up to $2 million of capital gain exemption for qualified individuals. This has now been canceled. The Underused Housing Tax is also eliminated for 2025. This was effective since 2022 and was imposed on an annual basis at a rate of 1% of the value of the property. Although the federal version of this is eliminated, provincial and municipal rules related to empty homes may still be in effect across Canada. The luxury tax on aircrafts and vessels such as boats is also eliminated. The speculation was the cost to implement these was going to be higher than the revenue they expected to bring in. An election promise to reduce the RRIF minimum by 25% for one year is also excluded from this budget. So for investors that were waiting for the new rules to come out, there is now clarity. The reduction is not going to apply. And perhaps on a more positive note, speculation of a wealth tax or significant increases to tax rates to plug the gap on the deficit is not included in this budget.

And finally, how would he describe the 2025 federal budget?

RC: Overall, looking at this government’s first tax package, the general takeaway here is, this is a fairly boring budget, at least from a tax perspective. This could be a good thing, as that means many existing tax planning are not drastically impacted, and there are no big alarms for a lot of investors.

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