Earlier this month, the Department of Finance released draft legislation addressing several proposals. The legislation is out for comment until Sept. 30, and Parliament resumes sitting Sept. 19. Ahead of that, we take yet another look at the status of major tax promises and proposals still outstanding:
Outstanding from the 2018 federal budget
Proposal: Any non-resident trust that files a T3 tax return and virtually all express trusts resident in this country will have to turn over beneficial ownership information to the Canada Revenue Agency for taxation years ending on or after Dec. 31, 2021.
Status: August’s draft legislation confirmed the requirements will be effective for trusts with taxation years that end on and after Dec. 31, 2022. The draft legislation also confirmed that bare trusts are covered by the requirements, even though tax practitioners have expressed concern that clients may have bare trusts without realizing it.
Outstanding from the 2019 federal budget
Proposal: Change taxation affecting ETFs and mutual funds (e.g., allocation to redeemers).
Status: Passed into law June 29, 2021, as part of the Budget Implementation Act, 2021. Mutual fund changes are retroactive to March 19, 2019. For ETFs, changes don’t apply to tax years that begin before Dec. 16, 2021, but do apply to tax years beginning after that day. The act broadened that deferral to include mutual fund trust ETFs created after budget day 2019.
Specific rules for ETFs were released in February’s draft legislation, and were out for comment until April 5. The legislation includes a revised allocation to redeemers formula that requires only that the ETF know its net asset values as of the end of the current and preceding tax year; the amount that was redeemed by unitholders; and the capital gain for the entire ETF.
Allocation to redeemers was not addressed in the August draft legislation.
Outstanding 2019 election promises
Promise: Enact a luxury tax of 10% on new cars and aircraft costing more than $100,000 and on new boats costing more than $250,000. The tax would be calculated as the lesser of 20% of the value above the thresholds and 10% of the full value.
Status: This tax was included in the Budget Implementation Act, 2022 (tabled as Bill C-19), which received royal assent on June 23. The tax takes effect on Sept. 1.
Promise: Raise CPP (and QPP) survivor’s benefit by 25%.
Status: Finance Minister Chrystia Freeland was directed to implement this in her 2021 mandate letter. No update since our last check-in.
Promise: Increase Canada Child Benefit (CCB) by 15% for kids younger than one year old; make EI maternity and parental benefits tax-exempt.
Status: No progress.
Promise: Double the child disability benefit.
Status: No progress.
Outstanding from the 2020 speech from the throne
Promise: Enact a new Canadian disability benefit modelled on the guaranteed income supplement.
Status: On June 2, the Liberals introduced Bill C-22, the Canada Disability Benefit Act, to create a Canada Disability Benefit. The bill is currently at second reading in the House of Commons, which resumes sitting Sept. 19.
Promise: Revamp the EI system.
Status: Employment Minister Carla Qualtrough’s mandate letter asked her to “bring forward and begin implementing a plan to modernize the EI system for the 21st century” by summer 2022. Phase 1 of consultations on modernizing the EI system closed in February; Phase 2 closed July 29.
Promise: Permit free, automatic tax returns for simple situations.
Status: No progress.
Outstanding from the 2021 federal budget
Proposal: Impose an annual 1% tax on the value of non-resident, non-Canadian-owned residential real estate that is considered to be vacant or underused.
Status: Final details of this tax, which came into force Jan. 1, 2022, were released in the fall economic update. The legislation to implement the tax, Bill C-8, received royal assent on June 9.
Proposal: Expand disability tax credit eligibility in the areas of mental functions and life-sustaining therapy.
Status: In June, the Federal Standing Committee on Finance passed a motion to amend the Budget Implementation Act (Bill C-19), removing the requirement that Canadians living with Type 1 diabetes meet the 14-hour criteria under life-sustaining therapy to qualify for the Disability Tax Credit. Bill C-19 received royal assent in June.
Proposal: Examine raising charities’ disbursement quota, which currently is 3.5%.
Status: In the 2022 federal budget, the Liberals proposed increasing the disbursement quota to 5% from 3.5% for the portion of property registered charities do not use in charitable activities or administration that exceeds $1 million. This proposal appeared in the August draft legislation.
Outstanding 2021 election promises
Promise: Raise the corporate income tax rate for banks and insurers to 18% from 15% on all earnings above $1 billion. These financial services institutions also would have to contribute to a Canada Recovery Dividend (CRD).
Status: Budget 2022 proposed that a bank and insurer surtax be set at 1.5% for taxable income over $100 million for taxation years that end after April 7, meaning those companies would pay 16.5% on income above that threshold going forward. This proposal appeared in the August draft legislation.
That draft legislation also confirmed that banks and insurers would have to pay a one-time 15% tax on the average of 2021 and 2020 taxable income above $1 billion. (The 2022 federal budget had proposed taxing 2021 taxable income, which was generally higher than the averaged amount.) The CRD liability would be imposed for the 2022 taxation year and would be payable in equal amounts over five years.
Promise: Develop a minimum tax rule to ensure that top earners (those earning more than $216,511 in 2021) pay at least 15% per year.
Status: In Budget 2022, the government proposed reviewing the existing alternative minimum tax regime to ensure top earners pay at least 15% per year. Details on the new regime will appear in the fall fiscal and economic update, the government stated.
Promise: Double the Home Buyers’ Amount to $10,000 from $5,000.
Status: This was proposed in Budget 2022 and included in August’s draft legislation.
Promise: Double the Home Accessibility Tax Credit to $20,000.
Status: Proposed in Budget 2022 and included in the 2022 budget implementation act.
Promise: Introduce a tax-free First Home Savings Account to enable Canadians younger than 40 to save up to $40,000 toward their first home, with no taxes on contributions or withdrawals.
Status: The Liberals introduced the FHSA in the 2022 federal budget. Full details of the FHSA were included in the August draft legislation.
Promise: Introduce an “anti-flipping tax” on residential homes, requiring property to be held for at least 12 months.
Status: Budget 2022 proposed an anti-flipping rule to tax gains earned on residential real estate held for fewer than 12 months as business income, subject to certain exemptions. The August draft legislation provided a few more details on the tax, which is now called the “residential property flipping rule.”
Promise: Introduce a Multigenerational Home Renovation Tax Credit for families adding a secondary unit to their home for a family member to live with them. Families would be able to claim a 15% tax credit up to $50,000 in eligible renovation and construction costs.
Status: Proposed in Budget 2022 and included in August’s draft legislation.
Promise: Make the Canada Caregiver Credit refundable.
Status: Included in Freeland’s mandate letter, but not mentioned in Budget 2022.
Promise: Implement a Career Extension Tax Credit to allow working seniors older than 65 who earn at least $5,000 at their jobs to eliminate taxes payable on a portion of their income and receive a tax credit of up to $1,650.
Status: Included in Freeland’s mandate letter, but not mentioned in Budget 2022.
Promise: Increase the guaranteed income supplement by $500 for single seniors and by $750 for couples, beginning at age 65.
Status: Included in the mandate letter for Kamal Khera, the Minister of Seniors, but not included in Budget 2022.
Promise: Create an expert panel to study the idea of an Aging at Home Benefit.
Status: Included in Budget 2022. There has been no announcement on the expert panel.
Outstanding from the 2022 federal budget
Proposal: Increase the level of taxable capital at which a business can still access the small business tax rate (a federal rate of 9% on the first $500,000 of taxable income, versus the general federal corporate rate of 15%).
Status: Addressed in August’s draft legislation.
Proposal: Require financial institutions to report the total fair market value of each RRSP and RRIF annually to the Canada Revenue Agency.
Status: Addressed in the August draft legislation. As of the 2023 tax year, issuers of RRSPs and RRIFs will be required to annually report the fair market value of all property held by the plans at the end of the calendar year.