This is another poorly thought-out measure, which proposes to provide a tax-free
$250 rebate to each Canadian who worked in 2023 and earned $150,000 or less
individual net income, and meets the following requirements:
2023 tax return filed by December 31, 2024, and:
claimed the tax credit for CPP or QPP contributions on employment or
self-employment earnings;
claimed the tax credit for EI or QPIP premiums on employment or
self-employment earnings; or
reported income from EI or QPIP benefits;
resident of Canada on March 31, 2025;
not incarcerated for a period of at least 90 days immediately prior to
April 1, 2025; and,
not deceased on April 1, 2025.
This excludes any Canadians who are unable to work because of disability or
who are retired and thus not working.
While the announcement suggested payments would occur in early spring 2025,
the March 31st and April 1st requirements make it improbable that payments will
be made before May 2025.
As of November 29, 2024, no legislation has yet been tabled for this
provision, and as it was not mentioned in the Fall Economic Statement, it
seems possible that this measure may not proceed.
Allowing those who made HBP withdrawals after January 1, 2022 and those
who will make withdrawals prior to the end of 2025 to take more time to
begin repayments, up to 5 years in total rather than 2.
30-year mortgage amortizations (see additional changes below) will be allowed for first-time home buyers
(at least one of the borrowers must be a first-time homebuyer),
but only if they are purchasing newly built homes, effective August
1, 2024. To be considered a first-time homebuyer, a borrower must meet one
of the following criteria:
has never purchased a home before;
in the last 4 years, has not occupied a home as a principal place of
residence that either they or their current spouse or common-law partner
owned; or
recently experienced the breakdown of a marriage or common-law
partnership. On this point, the regulations will follow the approach
that CRA has taken with respect to the Home
Buyers' Plan.
Remove the GST for student residences built for public universities,
public colleges, and public school authorities. This will apply to new
student residences that begin construction on or after September 14, 2023
and before 2031, as long as construction is completed before 2036.
30-Year Mortgage Amortizations,
$1.5 Million Price Cap for Insured Mortgages
A September
16, 2024, Finance Canada news release announced that eligibility for 30-year
mortgage amortizations would be extended to all first-time homebuyers, not just
first-time homebuyers of new builds, as well as to all buyers of new builds, not
just first-time homebuyers of new builds.
The news release also announced the increase of the cap for insured mortgages
to $1.5 million from $1 million.
Both of these changes are effective December 15, 2024.
Secondary Suite Loan Program
- Principal Residence Exemption - GST on Value of Laneway Home
The budget originally indicated this would provide homeowners
up to $40,000 in low-interest loans to add secondary suites to their homes,
or laneway homes to their properties. The news release does not mention
low-interest loans, and indicates that the additional financing must not exceed
the project costs, so probably does not have a $40,000 limit. The new insured
mortgage refinancing product will be available effective January 15, 2025.
The new units must be fully self-contained units with separate entrances,
which means it is unlikely they'll be eligible for the principal residence
exemption. Before taking advantage of this, homeowners should read the information One
Principal Residence (Housing Unit) Per Couple, and seek advice from a
CPA tax specialist or a tax lawyer.
If a laneway home is built and then rented long term, GST/HST will be payable
on the value of the new home when it is first rented, less credits for tax paid
on the construction. See the LinkedIn post (not necessary to be a member
to view) by Noah Sarna, Commodity Tax Partner at Thorsteinssons Tax Lawyers, Hidden
tax trap in changes to mortgage insurance rules for adding secondary suites.
Tax Tips/Traps:
Secondary suites and laneway homes may not be eligible for the
principal residence exemption!
GST/HST will be payable on the value of a new laneway home
when it is first rented long-term.
which would provide a capital gains inclusion rate that is 1/2 the
prevailing inclusion rate, on up to $2 million in capital gains per
individual over their lifetime.
will be phased in by increments of $200,000 per year, beginning on
January 1, 2025, before reaching a value of $2 million by January 1,
2034.
With the 2/3 capital gains inclusion rate proposed in Budget 2024,
this would result in an inclusion rate of 1/3 for qualifying
dispositions.
This measure would apply in addition to any available capital gains
exemption.
For dispositions that occur on or after January 1, 2025.
Investors
/ Landlords / Business Owners / Capital Property Owners / Estate Planning -
Capital Gains Inclusion Rate Increase - Deferred to 2026
Increase the capital gains inclusion rate from 1/2 to 2/3 for
corporations and trusts, and from 1/2 to 2/3 on the portion of capital gains
realized in the year that exceed $250,000 for individuals, for capital gains
realized on or after June 25, 2024.
Deductions for net capital losses, the LCGE, the proposed Employee Ownership
Trust Exemption and the proposed Canadian Entrepreneurs' Incentive
are based on taxable capital gains after the inclusion rate is applied.
Graduated Rate Estates (GREs) and Qualified Disability Trusts (QDTs)
would also be eligible for the $250,000 threshold for capital gains that
are not allocated to a beneficiary in the year, reflecting that these
trusts are subject to the same progressive personal income tax rate
structure.
Technical
Interpretation TI 2024-1016011E5 - General Anti-Avoidance Rule (GAAR), dated
April 29, 2024 discussed whether the crystallization of an accrued
gain prior to the increase in the capital gains inclusion rate is subject to
GAAR. The position of CRA is that the crystallization, "solely as a means
of ensuring access to the current inclusion rate, would not, in itself, be
subject to GAAR". However, the TI also stated: "It is important to note, however, that the crystallization of an accrued capital gain as part of a series of transactions, one of the main purposes of which is to obtain a tax benefit (other than, or in addition to, the taxation of an accrued gain at the current inclusion rate) would not be immune from scrutiny under the
GAAR. In particular, we would refer you to our letter dated February 29, 2024 (CRA document
2023-0987941I7), in which we stated that the Income Tax Rulings Directorate would not provide rulings in respect of a series of transactions in which an individual shareholder proposes to engage in non-arm’s length transactions, one of the main purposes of which was to facilitate the extraction of corporate retained earnings other than in the form of a
dividend."
It's important for anyone thinking of pursuing EOTs to listen to the August
2024 Life in the Tax Lane video from Video Tax News, which reveals
surprising details of the EOT and discusses whether it is an exemption from tax,
or a deferral of tax.
Tax Tip: Thinking of establishing an EOT? Seek advice
from a qualified tax professional!
Canada
Child Benefit (CCB): extend eligibility for 6 months after a child's death, if the
individual would have otherwise been eligible for the CCB in respect of that
child.
Qualified
Investments for Registered Plans: invite stakeholders to provide
suggestions on how the qualified investment rules could be modernized on a
prospective basis to improve the clarity and coherence of the registered
plans regime.
Deduction
for Tradespeople's Travel Expenses: consider bringing forward amendments
to the Income Tax Act to provide for a single, harmonized deduction for
tradespeople's travel that respects the intent of Bill
C-241, which provides for a deduction with no cap on expenses,
retroactive to the 2022 taxation year.
income of the trusts established under the First Nations Child and
Family Services, Jordan's Principle, and Trout Class Settlement
Agreement, and
payments received by class members as beneficiaries of the trusts.
This measure would apply to the 2024 and subsequent taxation years.
Business and Other Tax
Measures
There
are many business income tax measures, international income tax measures, and
sales and excise tax measures. See Tax
Measures: Supplementary Information for information on all proposed tax
measures. The initial Notices of Ways and Means Motions are also available at
that link.
Canada Disability Benefit
Budget 2024 announced that consultations on this benefit would begin soon.
See 2.1
Taking Care of Every Generation and scroll down to (or do a search for)
Launching the Canada Disability Benefit.
See Canada Disability Benefit (CDB)
- Consultations were announced in June 2024 regarding the Canada Disability
Benefit Regulations.
Explanatory Notes on August 14, 2024 regarding the Capital Gains Inclusion
Rate (CGIR).
Explanatory Notes on August 15, 2024 regarding the Technical Amendments to
the Income Tax Act and Regulations - includes Bare Trusts
Interested Canadians were invited to email their comments by
September 3, 2024 for the changes to the Capital Gains Inclusion Rate (CGIR) and
the Lifetime Capital Gains Exemption (LCGE), and by September 11, 2024 for other
measures.
On June 10, 2024 a Notice
of Ways and Means Motion was made available regarding the capital gains
inclusion rate (CGIR), with "updated draft
legislation" to follow in July.