Budget Announcement:
The 2021 Federal Budget released April 19th introduced a number of new measures, and expanded a number of existing programs, intended to support Canadian individuals and businesses as the COVID pandemic continues. The full detail of the Department of Finance release and Budget documents is linked below but we’ve summarized what we feel are the more relevant portions for Virtus clients.
Individuals:
Canada Recovery Benefit (CRB) and Canada Recovery Caregiving Benefit (CRCB) have been expanded:
These programs replaced the popular Canada Emergency Response Benefit (CERB) and provide funds to people who were unable to work due to COVID, or who were providing care to young children or other family members due to COVID. The maximum number of weeks of eligibility for the CRB has been expanded to from 38 to 50 weeks, and for the CRCB from 38 to 42. The final 8 weeks of the CRB benefit will be reduced from the $500/wk benefits to date to $300/wk.
Further reading: RSM Canada details budget-related COVID relief information
Canada Workers Benefit threshold has been increased:
The CWB provides funds to individuals earning low levels of employment/self-employment income but was reduced as the income earned increased, starting at $13,064 for a single individual. That threshold where excess earnings begin to decrease the benefit available has been raised to $22,944 for a single individual, and $26,177 for families.
Old Age Security benefits will be increased for individuals aged 75 and over:
The Budget announced a one-time $500 payment coming in August 2021 to OAS recipients who would be 75 and over as of June 2022. Legislation has been proposed that would increase the OAS benefits by 10% for pensioners 75 and older on an ongoing basis from July 2022.
Expansion of the situations eligible for the Disability Tax Credit:
Additional criteria and expanded therapeutic activities have been included to increase the criteria that would be eligible for the Disability Tax Credit.
New luxury item tax on new vehicles/aircraft over $100,000 and new boats over $250,000:
The new tax will be the lesser of 10% of the total cost and 20% of the amount over the threshold and will go into effect on Jan 1, 2022. It will not apply to commercial, racing vehicles, RVs or certain special use vehicles, and will apply whether purchased in Canada or imported.
Further reading: RSM Canada provides detail on personal & indirect tax changes
Businesses:
Immediate deductibility for up to $1.5M/yr of eligible capital asset additions:
Effective April 19, 2021 and applying to assets available for use before Jan 1, 2024, Canadian controlled private businesses will be able to deduct the cost of assets in the year of purchase that would normally be deducted over multiple years. The $1.5M limit is for each tax year and must be shared between “associated” corporations, and will apply to most capital assets (excluding buildings and some intangibles and assets acquired from non-arm’s length parties).
Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) programs extended to Sept 25, 2021:
Both programs had been set to end on June 6, 2021 but have been extended to Sept, with the groundwork laid for an additional possible extension to November 20, 2021. The eligibility criteria will be restricted to only businesses experiencing more than a 10% revenue decrease and the subsidy rate calculations will be reduced in the periods starting July 4, 2021.
Further reading: RSM Canada details budget-related COVID relief information
New Canada Recovery Hiring Benefit to help fund additional employee wages:
This new program would offset a portion of employee wages for the June 6 to November 21, 2021 period, and would be available to Canadian private corporations, individuals, charities and non-profits that have increased wage costs but are still experiencing a revenue decrease compared to pre-COVID results. This benefit would be an alternative to the CEWS, not in addition to it, but employers would be able to claim the higher of the two support amounts.
Corporate tax rate reduction for Zero-Emission Technology Manufacturers:
The federal corporate tax rate will be reduced by 50% on profits from eligible activities related to Zero-Emission Technology manufacturing from Jan 1, 2022 to Jan 1, 2029 with smaller reductions until Jan 1, 2032.
Further reading: RSM Canada details business tax changes
Additional measures for the future:
The minimum wage increase to $15/hr:
The Government intends to introduce legislation to increase federal minimum wage to $15/hr across Canada, which will also rise with inflation. The increase will apply to the federally regulated private sector and would not decrease the minimum wage in jurisdictions where the minimum wage is already more than $15/hr.
New tax on vacant residential property owned by non-residents:
The Budget proposes to levy an annual 1% tax on the value of vacant or underused residential real estate that is owned by non-residents of Canada who are not citizens or do not have permanent resident status. The tax would be levied starting in 2022, with reporting starting in 2023. As part of this measure, all affected non-resident owners will be required to file a disclosure of their residential properties in Canada, whether the tax would apply or not. Further input from stakeholders will be requested before a final form of the tax legislation is released.
