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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
Projected Federal Budget Deficits
Personal Income Tax & Other Personal Measures
Electronic Filing and Certification of Tax and Information Returns
Reportable and Notifiable Transactions - Mandatory Disclosure Rules
Legislation re 2021 Budget
August 9, 2022 Draft Legislation for Consultation
August 9, 2022 news release re amendments to the following measures:
 | Mandatory Disclosure Rules; |
| Avoidance of Tax Debts; |
| The Electronic Filing and Certification of Tax and Information Returns |
| Reporting Requirements for Trusts; |
| Fixing Contribution Errors in Registered Pension Plans |
Submissions should be made by September 30, 2022.
February 4, 2022 Draft Legislation for Consultation
Draft legislation was released on February 4, 2022 by the Department of Finance, for consultation, for many items that were proposed in the 2021 Budget. Canadians were invited to provide comments on the draft proposals and sample notifiable transactions. Submissions should be received by April 5, 2022 for:
| Taxes applicable to Registered Investments; |
| Mandatory Disclosure Rules; |
| Avoidance of Tax Debts; |
| Audit Authorities; |
| Reporting Requirements for Trusts; |
| Mutual Funds: Allocation to Redeemers; and |
| Crypto Asset Mining |
Submissions relating to Interest Deductibility Limitation measure were accepted until May 5, 2022.
Submissions on all other measures were to be received by March 7, 2022. One of these measures is Immediate Expensing of Capital Assets.
See the Video Tax News summary of Significant Draft Legislation Released.
Legislative Proposals Relating to the Select Luxury Items Tax Act were released March 11, 2022
Bills Tabled and Passed
Bill C-30 Budget Implementation Act, 2021, No. 1 - Received Royal Assent June 29, 2021
Projected Federal Budget Deficits
| $354 billion for 2020-2021 |
| $144 billion to $169 billion for 2021-2022 |
| $52 billion to $63 billion for 2022-2023 |
| $43 billion to $54 billion for 2023-2024 |
| $28 billion to $39 billion for 2024-2025 |
| $23 billion to $34 billion for 2025-2026 |
Personal Income Tax & Other Personal Measures
Increasing Old Age Security for Canadians 75 and Over
Proposals:
| Provide a one-time payment of $500 in August 2021 to OAS pensioners who will be 75 or over as of June 2022. |
| Introduce 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:
| Canada Recovery Benefit (CRB)
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| Canada Recovery Caregiving Benefit (CRCB)
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| EI sickness benefits
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| Legislative 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. The legislation was not included in Bill C-30.
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.
Climate Action Incentive (CAI)
The budget proposes to end the practice of the CAI being claimed on the tax return, and instead provide quarterly payments to taxpayers. The 2022 CAI will not be claimed on the 2021 tax return. See our article on the Climate Action Incentive.
Draft legislative proposals were released by the Department of Finance, along with a news release, on December 3, 2021, to implement this change. The legislation was included in Bill C-19, Budget Implementation Act, 2022, No. 1.
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:
| Canada Emergency Response Benefits / Employment Insurance Emergency Response Benefits; |
| Canada Emergency Student Benefits; |
| Canada Recovery Benefits; |
| Canada Recovery Sickness Benefits; and |
| Canada 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:
| Implement a national annual 1% tax |
| on the value of non-resident, non-Canadian owned residential real estate considered to be vacant or underused |
| Effective January 1, 2022 |
| All owners, other than Canadian citizens or permanent residents of Canada must file a declaration as to the current use of the property |
| Significant penalties for failure to file |
Other Personal Taxation Proposals
| include postdoctoral fellowship income in "earned income" for RRSP purposes. |
| provide more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions. |
| revision 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. |
| proposals 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
| proposal 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. | ||||||||||
| proposal 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:
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| proposal 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
The draft legislation for this proposal was released on February 4, 2022, for consultation.
| Tax Preparers:
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| Filers of Information Returns:
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| Corporations and GST/HST Registrants
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Other Proposals re Electronic Payments and Signatures
| proposals 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. |
| eliminate 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:
| Canada Emergency Wage Subsidy |
| Canada 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
The draft legislation for this proposal was released on February 4, 2022. The proposal has been expanded. See Immediate Expensing in our Capital Cost Allowance article.
Other Business Measures:
| Corporate 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 |
| Capital Cost Allowance for Clean Energy Equipment - Classes 43.1 and 43.2 eligibility expanded to include additional equipment |
| Film or Video Production Tax Credits to be extended by 12 months |
| Mandatory Disclosure Rules for Reportable Transactions: the government is consulting on proposals to enhance these disclosure rules. Comments to be submitted by September 3, 2021. |
| Avoidance of Tax Debt: Measures to address highly aggressive tax plans that attempt to eliminate the underlying tax liability of the transferor |
| Audit 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. |
Reportable and Notifiable Transactions - Mandatory Disclosure Rules
For more information on this topic see:
Mandatory disclosure rules - Guidance - from Canada Revenue Agency. This was updated on September 6, 2023 to add the following paragraph:
| A limitation of liability clause in a professional engagement letter would normally not, in and of itself, trigger a reportable transaction reporting hallmark, provided that the purpose of the limitation clause is to generally limit the accountant’s liability for negligence (i.e., it is related to professional indemnity insurance) |
Life in the Tax Lane August 2023
Backgrounder - Income Tax Mandatory Disclosure Rules Consultation: Sample Notifiable Transactions from Department of Finance
Proposed Amendments to the Income Tax Act: Reportable and Notifiable Transactions, from Borden Ladner Gervais LLP
More Bite Than Bark: Proposed Changes to Tax Laws Look To Empower the CRA, from McLennan Ross LLP
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:
| Require non-resident vendors supplying digital products or services to consumers in Canada to register to collect GST/HST. |
| Require 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. |
| Apply 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:
| new luxury cars and personal aircraft priced over $100,000, and |
| boats 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:
| for vehicles and aircraft priced over $100,000, the lesser of
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| for boats priced over $250,00, the lesser of
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Other Sales and Excise Tax Measures
| Proposal 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. |
| Excise 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. |
| Tax 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: February 15, 2024