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Federal Budget -> 2021 Federal Budget

2021 Federal Budget - April 19, 2021

All budget measures are subject to legislative approval.  Not all budget measures are included below, just the main tax measures.  See the 2021 Federal Budget website for complete information.

All federal draft legislation, whether budget-related or not, can be found on the Department of Finance website Draft Legislation page.

Contents

Legislation re 2021 Budget

Projected Federal Budget Deficits

Personal Income Tax & Other Personal Measures

Electronic Filing and Certification of Tax and Information Returns

Business Income Tax Measures

Sales and Excise Tax Measures

Legislation re 2021 Budget

Bill C-30 Budget Implementation Act, 2021, No. 1 - Received Royal Assent June 29, 2021

Projected Federal Budget Deficits

bullet$354 billion for 2020-2021
bullet$144 billion to $169 billion for 2021-2022
bullet$52 billion to $63 billion for 2022-2023
bullet$43 billion to $54 billion for 2023-2024
bullet$28 billion to $39 billion for 2024-2025
bullet$23 billion to $34 billion for 2025-2026

Personal Income Tax & Other Personal Measures

Increasing Old Age Security for Canadians 75 and Over

Proposals:

bulletProvide a one-time payment of $500 in August 2021 to OAS pensioners who will be 75 or over as of June 2022.
bulletIntroduce legislation to increase regular OAS payments for pensioners 75 and over by 10% on an ongoing basis as of July 2022.

See Increasing Old Age Security for Canadians 75 and Over on the 2021 Budget website.

Canada Emergency Benefits Extended

The budget proposes the following extensions to emergency income supports:

bulletCanada Recovery Benefit (CRB)
bulletextended for up to 12 additional weeks
bulletto a maximum of 50 weeks
bulletfirst 4 additional 12 weeks to be paid at $500 per week
bulletremaining 8 weeks at $300 per week
bulletnew claimants after July 17, 2021 would receive the $30 per week benefit, available until September 25, 2021
bulletCanada Recovery Caregiving Benefit (CRCB)
bulletextended for 4 additional weeks
bulletto a maximum of 42 weeks at $500 per week
bulletEI sickness benefits
bulletenhance from 15 to 26 weeks, to take effect in summer 2022
bulletLegislative amendments to provide authority for additional potential extensions of the CRB and its associated suite of sickness and caregiving benefits, as well as regular EI benefits until no later than November 20, 2021, should they be needed.

Disability Tax Credit (DTC)

The budget proposes changes to the eligibility rules for the disability tax credit.  The proposals include changes to the description of the mental functions necessary for everyday life, as well as changes regarding what activities are regarded as part of life-sustaining therapy.

These proposed changes would apply to the 2021 and subsequent taxation years, for DTC certificates filed on or after Royal Assent of the legislation.

Canada Workers Benefit (CWB)

Enhancements are proposed, starting in 2021, for the CWB for single taxpayers, couples, and for individuals eligible for the disability tax credit.  This would provide a higher CWB for some individuals and couples, and would result in more taxpayers being eligible for CWB.

Also proposed is the introduction of a "secondary earner exemption" for individuals with an eligible spouse. This would allow up to $14,000 of income of the lower-income spouse to be excluded from adjusted family net income.  This would allow more couples to benefit from the CWB.

These changes apply to most provinces and territories, but Alberta, Nunavut and Quebec have provincial reconfiguration agreements that determine the amounts for their Canada Workers Benefits.  The 2021 changes for these will probably not be known until the fall.

See our Canada Workers Benefit article.

Northern Residents Deductions

Budget 2021 proposes to expand access to the travel component of the Northern Residents Deductions, for the 2021 and subsequent taxation years.

See Northern Residents Deductions on the Budget 2021 website.

See TaxTips.ca article on the Northern Residents Deduction.

Tax Treatment of COVID-19 Benefit Amounts

If the repayment of COVID-19 benefits does not occur in the same tax year as the receipt of the benefit, it is proposed to allow individuals the option to claim a deduction on line 23200 (other deductions) for the year in which the benefit amount was received rather than the year in which the repayment was made.  This option would be available for benefit amounts repaid at any time before 2023.

For this purpose, the included COVID-19 benefits are:

bulletCanada Emergency Response Benefits / Employment Insurance Emergency Response Benefits;
bulletCanada Emergency Student Benefits;
bulletCanada Recovery Benefits;
bulletCanada Recovery Sickness Benefits; and
bulletCanada Recovery Caregiving Benefits.

Individuals who have already filed their tax return for the year in which the benefit was received would be able to request an adjustment to their tax return for that year.  CRA has indicated they will not process adjustment requests until the legislation has received Royal Assent.

Also proposed is an amendment to the Income Tax Act to ensure that the above COVID-19 benefit amounts are included in the taxable income of individuals who reside in Canada but are considered non-resident persons for income tax purposes.

See Tax Treatment of COVID-19 Benefit Amounts on the Budget 2021 website.

Tax on Unproductive Use of Housing by Non-Resident Owners

Budget proposal:

bulletImplement a national annual 1% tax
bulleton the value of non-resident, non-Canadian owned residential real estate considered to be vacant or underused
bulletEffective January 1, 2022
bulletAll owners, other than Canadian citizens or permanent residents of Canada must file a declaration as to the current use of the property
bulletSignificant penalties for failure to file

Other Personal Taxation Proposals

bulletinclude postdoctoral fellowship income in "earned income" for RRSP purposes.
bulletprovide more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions.
bulletrevision of the Part X.2 tax re registered investments holding property that is not a qualified investment for the registered plans for which it is registered, so that the tax is no longer charged in relation to the portion of the units that are held in non-registered accounts.
bulletproposals to limit opportunities for the abuse of charitable registration status for terrorist financing purposes, and changes to the rules applicable to all registered charities in respect of certain false statements.

Electronic Filing and Certification of Tax and Information Returns

Methods of Correspondence with Individuals and Businesses

bulletproposal to provide CRA with the ability to send certain notices of assessment electronically without the taxpayer having to authorize CRA to do so, for individuals who file their tax return electronically and those who employ the services of a tax preparer that files their tax returns electronically.  Taxpayers who file their tax returns in paper format would continue to receive a paper notice of assessment from CRA.
bulletproposal to change the default method of correspondence for businesses that use CRA's My Business Account portal to electronic only, but businesses could choose to also receive paper correspondence. This would apply in respect of:
bulletIncome Tax Act
bulletExcise Tax Act,
bulletExcise Act, 2001,
bulletAir Travellers Security Charge Act, and
bulletPart 1 of the Greenhouse Gas Pollution Pricing Act.
bulletproposal to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) and T5 (Statement of Investment Income) information returns to provide them electronically without having to also issue a paper copy, and without the taxpayer having to authorize the issuer to do so.  This would apply in respect of information returns sent after 2021.

Electronic Filing Thresholds Proposals

bulletTax Preparers:
bulletelectronic filing of tax returns to be required when more than 5 of either corporate or individual tax returns are prepared, down from 10. The exception for trusts would be removed.
bulletmaximum 5 paper returns of each type (corporate or individual) to be filed each calendar year, down from 10. This would apply for calendar years after 2021.
bulletFilers of Information Returns:
bulletthreshold for mandatory electronic filing of income tax information returns for a calendar year to be lowered from 50 to 5 returns, in respect of a particular type of information returns. This would apply for calendar years after 2021.
bulletCorporations and GST/HST Registrants
bulletrequire returns of most corporations and GST/HST registrants to file electronic returns under the Income Tax Act and Excise Tax Act. This would apply for taxation years beginning after 2021 for the Income Tax Act and for reporting periods that begin after 2021 for the Excise Tax Act.

Other Proposals re Electronic Payments and Signatures

bulletproposals re thresholds for mandatory remittances under the Income Tax Act, the GST/HST portion of the Excise Tax Act, Excise Act, w001, the Air Travellers Security Charge Act and Part 1 of the Greenhouse Gas Pollution Pricing Act.  See Electronic Payments on the Budget 2021 website.
bulleteliminate the requirement that signatures be in writing on certain prescribed forms.  See Handwritten Signatures on the Budget 2021 website.

Business Income Tax Measures

Emergency Business Supports

The following supports to be extended until September 25, 2021, with additional qualifying periods to be added until November 20, 2021, should the economic and public health situation warrant it, with subsidy rates to be gradually phased out starting on July 4, 2021:

bulletCanada Emergency Wage Subsidy
bulletCanada Emergency Rent Subsidy and Lockdown Support

Canada Recovery Hiring Program

Introduction of a new program to provide eligible employers with a subsidy of up to 50% on the incremental remuneration paid to eligible employees between June 6, 2021 and November 20, 2021.

The employer can claim either the hiring subsidy or the Canada Emergency Wage Subsidy for a qualifying period, but not both.

See Canada Recovery Hiring Program on the Budget 2021 website.

Immediate Expensing for CCPCs, of Certain Capital Assets

bullettemporary measure
bulletfor eligible property acquired by a Canadian-Controlled Private Corporation (CCPC) on or after April 19, 2021
bulletmust be available for use before January 1, 2024
bulletavailable for the year in which the property becomes available for use
bulletmaximum amount of $1.5 million per tax year, shared among associated members of a group of CCPCs, prorated for tax years shorter than 365 days.
bullethalf-year rule suspended for these properties
bulletno carry-forward of excess capacity for CCPCs with less than $1.5 million of eligible capital costs
bulleteligible property  would be capital property that is subject to the CCA rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-lived assets.

See Immediate Expensing on the Budget 2021 website.

Other Business Measures:

bulletCorporate Tax Rate Reduction for Zero-Emission Technology Manufacturers, for taxation years beginning after 2021, gradually phased out starting in taxation years that begin in 2029
bulletCapital Cost Allowance for Clean Energy Equipment - Classes 43.1 and 43.2 eligibility expanded to include additional equipment
bulletFilm or Video Production Tax Credits to be extended by 12 months
bulletMandatory Disclosure Rules for Reportable Transactions:  the government is consulting on proposals to enhance these disclosure rules.  Comments to be submitted by September 3, 2021.
bulletAvoidance of Tax Debt:  Measures to address highly aggressive tax plans that attempt to eliminate the underlying tax liability of the transferor
bulletAudit Authorities:  Amendments to confirm that CRA officials have the authority to require persons to answer all proper questions, and to require persons to respond to questions orally or in writing, in any form specified by the relevant CRA official.

Sales and Excise Taxes

GST/HST and E-commerce

Changes to the GST/HST system announced in the 2020 Fall Economic Statement, with some amendments:

bulletRequire non-resident vendors supplying digital products or services to consumers in Canada to register to collect GST/HST.
bulletRequire distribution platform operators to register under the normal GST/HST rules to collect GST/HST for sales of goods shipped from a fulfillment warehouse or another place in Canada, when those sales are made by non-registered vendors through distribution platforms.  Non-resident vendors not using a distribution platform would also be required to register for the same type of sales.
bulletApply GST/HST on all supplies of short-term accommodation in Canada facilitated through a digital accommodation platform, such as Airbnb and other similar platforms.

See Application of the GST/HST to E-commerce on the Budget 2021 website.

Invoicing Requirements to Support ITC Claims

The invoicing requirement thresholds are to be increased, related to the information that must be provided on a vendor invoice.

See Information Requirements to Support ITC Claims on the Budget 2021 website.

GST New Housing Rebate Conditions

The budget includes a proposal to remove the condition that where 2 or more individuals buy a new home together, each of them must be acquiring the home for use as their primary place of residence or the primary place of residence of a relation.  The rebate would be available as long as the new home is acquired for use as the primary place of residence of any one of the purchasers or a relation of any one of the purchasers.  This measure would apply to a supply made under an agreement of purchase and sale entered into on or after April 20, 2021.

TaxTips.ca resources: GST/HST Rebate for New Housing Purchases and Substantial Renovations

See GST New Housing Rebate Conditions on the Budget 2021 website.

Tax on Select Luxury Goods

The budget proposes to introduce a tax on the retail sale of:

bulletnew luxury cars and personal aircraft priced over $100,000, and
bulletboats priced over $250,000

The tax for vehicles sold in Canada would apply at the point of purchase if the final sale price paid by the consumer, not including the GST/HST or provincial sales tax) is above the $100,000 or $250,000 threshold.  Importations of vehicles, aircraft and boats would also be subject to the tax.

Tax rates:

bulletfor vehicles and aircraft priced over $100,000, the lesser of
bullet10% of the full value of the vehicle, or
bullet20% of the value above $100,000
bulletfor boats priced over $250,00, the lesser of
bullet10% of the full value of the boat, or
bullet20% of the value above $250,000

Other Sales and Excise Tax Measures

bulletProposal for a joint election between a vendor and a province re rebate of excise tax for goods purchased by provinces.  See Rebate of Excise Tax for Goods Purchased by Provinces on the Budget 2021 website.
bulletExcise duty on tobacco to be increased by $4 per carton of 200 cigarettes, with corresponding increases for other tobacco products.  Inventories held by certain manufacturers, importers, wholesalers and retailers at the beginning of the day on April 20, 2021 will be subject to an inventory tax of $0.02 per cigarette, subject to certain exemptions.  This measure comes into force on April 20, 2021.
bulletTax on vaping products to be implemented in 2022 through a new excise duty framework - input from industry and stakeholders on these proposals is invited.

For information on all tax measures, see the Tax Measures Supplementary Information on the Budget 2021 website.  This includes the Notices of Ways and Means Motions.

Revised: July 07, 2021

 

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