Liberal tax promise tracker: Post–Budget 2025 edition

“Long lists” of tax-related proposals remain unenacted, said Fred O’Riordan, EY Canada’s national leader of tax policy in Ottawa. “Now, we’re going to have more budget implementation bills as notices of ways and means motions translated into draft legislation soon — but there’s all that backlog … to get cleared up.”

The backlog represents tax uncertainty, which weighs on planning and investment decisions, O’ Riordan said. Meanwhile, Budget 2025 aims to generate $1 trillion in public and private investment over the next five years.

If the government wants to “leverage investments through these tax changes, let’s see [the changes] pass,” O’Riordan said.

Notices of ways and means motions were tabled on budget day related to certain proposals, and a notice of ways and means motion was tabled on Monday to introduce a bill to implement various proposals either from Budget 2025 or earlier. Monday’s motion included Budget 2025’s measure of repealing the underused housing tax and the luxury tax on aircraft and vessels. (Editorial update: Bill C-15 was subsequently introduced in the House on Tuesday.)

The House of Commons sits until Dec. 12 before breaking for the holidays, and the Senate sits until Dec. 18 or 19.

Proposals in legislation

Since our last check-in, Bill C-4 was introduced in the House but hasn’t yet reached third reading. The bill includes these measures:

• A 1% tax cut to the first federal tax bracket, applicable on taxable income up to $57,375 for 2025. The cut reduces the first marginal personal income tax rate to 14.5% from 15% for 2025, given that the measure took effect mid-year on July 1, 2025. The rate drops to 14% starting in 2026
• GST rebate for first-time homebuyers, covering 100% of the GST on new home sales of up to $1 million, with GST relief phased out as the price approaches $1.5 million

Proposals in notices of ways and means motions

Personal income tax measures from Budget 2025

• Clampdown on double claiming with the non-refundable home accessibility tax credit, so that an expense claimed under the medical expense tax credit can’t also be claimed under the home accessibility tax credit (2026 and subsequent tax years)
• Strengthened 21-year deemed disposition of trust assets
• Temporary non-refundable top-up tax credit, applicable for the 2025–2030 tax years, to maintain the 15% rate for non-refundable tax credits claimed on amounts in excess of the lowest income tax bracket threshold ($57,375 for 2025). The measure ensures that taxpayers with such a significant amount of credits don’t have their tax liability increased by the 1% cut to the first marginal personal income tax rate
• Temporary refundable personal support workers tax credit, available in certain provinces for the 2026–2030 tax years, equal to 5% of eligible earnings, up to a maximum of $1,100 per year
• Automated tax filing for lower-income Canadians with filing to begin in 2026 for the 2025 tax year. The Department of Finance is seeking input on the measure until Jan. 30, 2026, at autotaxfiling-autoimpot@fin.gc.ca. CPA Ontario said the measure “represents genuine progress on tax simplification”

Business income tax measures from Budget 2025

Budget 2025’s language is “much more business-friendly” compared to previous Liberal budgets, O’Riordan said. “We certainly need more capital investment, more productivity-enhancing developments on the policy front, and more competition — we need to diversify [economic] markets,” he said. “The budget was all about that.”

However, the budget didn’t address broader long-standing issues, such as regulatory barriers and infrastructure challenges, he said. Those are “headwinds that cause business to pause” when considering Canada as an ideal place to invest.

When it comes to attracting business investment, the budget’s various proposals are largely “playing at the margins,” he said. “A lot of those bigger concerns that business has around risk and uncertainty are still here.”

Budget 2025’s measures for business tend to be limited and targeted:

• Temporary immediate expensing for manufacturing and processing buildings. The budget’s so-called productivity super-deduction comprises immediate expensing for manufacturing and processing buildings and the reinstatement of the existing accelerated investment incentive
• Increased expenditure limit of $6 million for scientific research and experimental development tax incentive program; the budget also confirmed the government’s intention to introduce legislation to implement associated changes from the 2024 fall economic statement
• Previously proposed clean electricity investment tax credit and enhancements to existing clean economy tax credits, with retroactive eligibility
• Addition of 12 critical minerals to be eligible under the critical mineral exploration tax credit (for individual investors), for certain exploration expenses that businesses flow through to investors via flow-through shares. This measure would apply to expenses renounced under eligible flow-through share agreements entered into after Nov. 4 and on or before March 31, 2027

Changes to flow-through shares regime

As explained in the budget, corporations can use flow-through shares to renounce Canadian exploration expenses (CEE), including Canadian renewable and conservation expenses (CRCE), and Canadian development expenses (CDE). Investors in the flow-through shares can then deduct the expenses in calculating their own taxable incomes — at a 100% rate for CEE, including for the CRCE, and at a 30% rate on a declining-balance basis for the CDE.

The critical mineral exploration tax credit (listed above) provides an additional income tax benefit for investors, and is equal to 30% of specified mineral exploration expenses (i.e., CEE) incurred in Canada and renounced to flow-through share investors. As proposed in the budget, the credit will apply to a dozen more critical minerals.

Investors and businesses should note that the budget is drilling down on the definition of CEE. As things stand, CEE may include expenses for determining the existence, location, extent or quality of a mineral resource in Canada. The budget proposes to “clarify” that expenses incurred for determining quality, specifically, don’t include expenses related to determining economic viability or engineering feasibility of the mineral resource.

“[A] mineral resource’s ‘quality’ for CEE purposes has historically been interpreted by the Canada Revenue Agency (CRA) to relate to the resource’s underlying physical characteristics,” the budget says. “Expenses for technical studies (which are typically undertaken to assess a mineral resource’s engineering feasibility and economic viability as a mining project, rather than its underlying physical characteristics) have generally been viewed by the CRA as being excluded from CEE.”

The reason for the clarification, referenced in the budget, is a recent decision of the B.C. Supreme Court that held that “quality” under the provincial equivalent of CEE could be interpreted to include economic viability — not just physical characteristics — of a mineral resource.

The proposed clarified CEE definition would apply as of Nov. 4.

The budget also confirmed that the government intends to proceed with the previously announced proposal of extending by two years — to March 31, 2027 — the 15% mineral exploration tax credit for certain types of CEE.

Investors should also be aware that in a footnote in the budget, the government says it dropped its proposal to fully allow (at a 100% rate) CEE deductions under the alternative minimum tax (AMT). The proposal was in draft legislation from August 2024.

“While the budget didn’t specify if this change in government policy would be retroactive to 2024, when the AMT regime was tightened, or would only apply to future flow-through share investments, I suspect that the disallowance of the resource deduction for AMT purposes will be retroactive,” said Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth, in an email.

In a report outlining Budget 2025 measures, Golombek suggested that “flow-through share investors should speak to their tax advisors to see how AMT could impact them.”

Outstanding measures included in Monday’s notice of ways and means motion

• Updated technical amendments to trust reporting legislation. Also, the budget says reporting by bare trusts will apply to tax years ending on or after Dec. 31, 2026. While many common bare trust arrangements have been exempt from the expanded trust reporting rules, others continue to face the administrative burden of filing
• Technical amendments to extend post-mortem planning provisions (loss carryback strategy and stop-loss rule) to the first three tax years of a graduated rate estate
• Proposed increase in the lifetime capital gains exemption limit to $1.25 million on the sale of small business corporation shares and farming and fishing property on or after June 25, 2024
• Expansion of capital gains rollovers on eligible small business corporation shares
• Technical changes to the existing capital gains exemption for business sales to employee ownership trusts
• Elimination of tax deferral for investment income earned by substantive Canadian-controlled private corporations using foreign-resident corporations (from Budget 2022)
• Exemption of the Canada Disability Benefit (CDB) from income. Budget 2025 also proposes a one-time $150 payment to help recipients of the CDB offset the cost of their disability tax credit certification or re-certification. Further, “the government is committed to looking at ways to provide such a payment in respect of other Disability Tax Credit certifications as part of its work to review and reform the process to apply for the credit,” the budget says — a reference to a 2025 election campaign promise
• Extension of the 2024 charitable donations deadline (arising from the Canada Post strike)

A proposal to watch

Among the previously proposed measures that are moving ahead (subject to modifications), one to watch is proposed new audit powers for the CRA related to non-compliance with information requests — in draft legislation from August 2025.

Proposals with no updates since our last check-in

The following selected promises from the Liberals’ 2025 election platform under Carney’s leadership have no updates:

• Corporate tax system review. O’Riordan said he didn’t have high expectations that the budget would address it. The review is “the kind of thing that normally governments don’t do unless they have a majority,” he said. Still, “there’s a drastic need for [tax] reform — simplification, neutrality, competitiveness,” he added.
• Reduction of the mandatory minimum RRIF withdrawal by 25% for one year. Given the stock market recovery since the measure was proposed, it’s assumed to be dropped
• Increase of 5% to the guaranteed income supplement for one year
• Patent box. A preferential corporate tax rate on income derived from domestic intellectual property was among CPA Ontario’s pre-budget recommendations to overhaul the tax system and promote competitiveness. O’Riordan, who was one of the experts who informed the recommendations, said he was “a bit surprised and disappointed” that the measure wasn’t in the budget
• AI deployment tax credit