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Transcript
– We are here with Nicole Ewing, Director of Tax and Estate Planning at TD Wealth, to talk about the budget, which is just out moments ago. Nicole, if you wouldn’t mind running through what was really notable to you. And I know basically the big chunk of this right now is what the finance minister is proposing around housing. So tell us what we saw.
– Housing affordability – definitely a focus of this budget and so a number of different measures introduced to address that. The ban on foreign ownership of non-recreational residential property for a two-year period – now there’s a number of exemptions for that. So that does not include students, foreign workers, permanent residents, those who are going to become permanent residents and have a primary residence. So we’ll have to wait to see what the legislation says about that and how that’s going to be enforced.
Tax-free first-time homeowners savings account – I don’t think I got the name quite right. And we’ve heard about this before. That’s the $40,000 for those who are under the age of 40. They will have the savings account where they can contribute up to $40,000 to earn income within that account, tax-free, to be used towards the purchase of the home. It looks like the limit is going to be $8,000 a year. It’s a bit of a hybrid between what we see in RRSP and TFSA.
Also have a doubling of the first-time homeowner’s tax credit from $5,000 to $10,000. And that’s going to be retroactive, so that will apply to homes purchased after January 1, 2022. A $7,500 multigenerational home renovation tax credit – this is intended to help with creating secondary units for seniors and those with disabilities. Big investment into building housing for indigenous communities, further investment in funding into helping municipalities – so $4 billion to help municipalities update their zoning and permitting systems to get some of those approvals through more quickly.
And we did see the anti-flipping measures that had previously been discussed. And there was some discussion about whether or not our current rules would address that. But this looks like if you are selling within 12 months of purchasing, these rules may apply to you. And that would mean that’s going to count as business income as opposed to allowing the principal residence exemption to apply. So a laundry list of housing measures that were introduced today.
– And that’s, of course, I’d say of interest to those not only who are looking to buy a home for the first time but obviously maybe some perhaps who are looking to sell homes. Because that will certainly impact the overall market, as rates are expected to go up. So there’s a lot going on here. And it’s a good roundup of what we saw. What else did you see? Because I think the bulk of it was around housing affordability. But what else stood out?
– There were some other really interesting things as well that I think some of our viewers might want to pay attention to. So we could see the confirmation of the 15% minimum tax on high-income earners. Again, we do already have an alternative minimum tax to ensure that people are paying their fair share. But this is an additional measure that is intended to ensure that there’s not an excessive use of deductions and credits to reduce income. We have to wait for the details for that.
Non-CCPC planning – so this has been in the news quite a bit recently. A CCPC, a Canadian-Controlled Private Corporation, is taxed at a certain rate. There’s some planning that’s done to have those who are otherwise resident in Canada – so these are Canadian resident corporations but they’re intentionally not qualifying as CCPCs, which they then get a different and preferable rate on their investment income. So rules have come out to essentially eliminate that type of planning.
The small business deduction – as we know, we have an active business income – up to $500,000, we receive a preferential rate. The rules, the limits that would apply to limit the access to that deduction have changed from what is currently 10 million to 15 million. That range has been brought in from 10 million to 50 million. And an example that was given – this would impact, for example – a $30 million in taxable capital would have up to $250,000 of active business income as opposed to 0 under the current rules. So this is going to be significant for our business owners to be paying attention to.
And then the general anti-avoidance rule – so this is a rule that, in layman’s terms, if there’s not a rule against it in the Tax Act, the general anti-avoidance rule essentially kicks in to say that is not meeting what was intended. And the CRA can challenge taxpayers and the planning that they’ve done. There was a court case that determined the tax attributes.
So where we had not yet used the tax attribute to get the tax result, the GAAR would not apply. The government has come out and said they are going to introduce legislation to ensure that it does in those situations. So we have seen now the application of a rule to overrule a court decision. So that, again, would be interesting to our tax community to pay attention to.
– It’s interesting. There is a lot in here – and you mentioned – for business owners and such. And again, this isn’t really your wheelhouse, but I’ll mention it. But investment in electric vehicles – but there will be some investment, I think, some help for businesses who want to buy fleets or to those who are looking to personally do it. I know the devil’s in the details on this. But we saw a bit about that.
– We did, and significant numbers here. So we’re seeing a promised $547 million over four years, starting in ’22 to ’23, to help businesses upgrade their fleets to zero-emission vehicles. They’re expanding the eligibility of the programs with the type of vehicles that it would apply to, so more vans and trucks and SUVs that are likely used in business. So that’s a significant investment as well.
– The last thing I want to touch on is what wasn’t in this budget. I think investors are always nervous because we hear things about capital gains and taxing on primary residences – we didn’t see any of that.
– We didn’t see that. We didn’t see a change to the capital gains inclusion rate. This has been much talked about. So the current rate’s 50%. We’ve heard maybe 67, 75. That did not change. What else did I have on my list that I’ve crossed off as not being touched? We didn’t see any provision related to corporate ownership of residential real estate. So we did see a lot of housing discussion, but we didn’t see that.
No personal or corporate tax increases. And we didn’t yet see any amendments to bill C-208. That’s the legislation that was introduced that impacted the intergenerational transfer of small businesses. And some rules were changed there to ensure that an equal treatment for families passing on their business as to arm’s length people. There’s some issues with that bill that have been recognized. But we didn’t see any changes to the legislation, rather a consultancy. So still a lot to come, I expect, in the months to come in terms of either the legislation to implement what we’ve heard or to address further issues.
– Nicole, always great to have you with us. We should mention, of course, this is the budget proposed. It still has to pass. But given the state of the government and some of the arrangements that have been made, it’s looking very likely. So we’ll have to see what actually happens. But thank you so much for being here to explain what happened.
– Oh, my pleasure.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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