2021 Federal Budget Highlights

Below you will find some of the notable highlights from the 2021 Federal Budget released on April 19, 2021. For more details on any of the proposals listed below, please refer to the full release of the federal budget by following the link at the end.

• Increasing OAS (Old Age Security) for Canadians 75+: One-time lump-sum payment of $500 in August 2021 to OAS pensioners 75 or older as of June 2022. It also proposes a potential 10% increase on an ongoing basis starting July 2022.

• Improving access to the DTC (Disability Tax Credit): Help more families living with disabilities access this tax credit and the RDSP program. They aim to improve the definitions used to more medically relevant terminology.

• Luxury Tax on Cars, Boats and Aircraft: Starting January 1, 2022, a new luxury tax would apply to personal aircraft and vehicles with a retail sales price of over $100,000 and boats over $250,000. This would be calculated as 20% of the value above these thresholds or 10% of the full value. This is payable regardless if financed, leased, or purchased outright.

• $15 Minimum Wage: Introducing a new federal minimum wage of $15/hr rising with inflation.

• GST New Housing Rebate: Entitling home buyers to recover 36% of the GST on the price of a new home up to $350,000, with being phased out up to $450,000. Maximum rebate of $6300. Must be a primary residence.

• Decreasing Child Care Costs: Investment in a Canada-wide early learning and childcare system, aiming to reduce fees by 50% on average (outside Quebec) for parents with children in regulated childcare, by the end of 2022.

• Student Debt: Proposed extension on the waiver of interest accrual on Canada Student Loans and Canada Apprentice loans until March 31, 2023. Also, doubling the Canada Student Grants for two additional years.

• Pandemic Financial Support: Proposed to tack on 12 additional weeks to the CRB (Canada Recovery Benefit) to a maximum of 50 weeks. The first four weeks at $500/week and then decreasing to $300/week for the remaining eight weeks. An additional four weeks would be applied as well to the Canada Recovery Caregiving Benefit, to a maximum of 42 weeks at $500/week. The rent subsidy and lockdown support have been proposed to extend to September 25, 2021.

• Employment Insurance Program: Proposes billions of dollars to extend sickness benefits offered by the EI program to extend coverage from 15 weeks to 26 weeks.

• Supporting Businesses: Proposed to extend the Canada Emergency Wage Subsidy to September 25th, with the subsidy rate decreasing as of July 4th. This program will be replaced with the new Canada Recovery Hiring Program, with proposed coverage from June to November. This is designed to encourage the hiring of new or previously laid-off workers as the economy rebounds.

• Skilled Tradespeople: Funding to be provided to create a new Apprenticeship Services to help 55,000 first year apprentices in construction and manufacturing Red Seal trades connect with opportunities. Plus, some employer incentives for those hiring underrepresented demographics in trades.

• Lower Home Energy Costs: Creation of new interest free loan program up to $40,000 through CMHC to completed deep home energy retrofits. Program should be available summer 2021 and support up to 200,000 households.

• New Tax for Digital Services Giants: Introducing a new 3% tax on the revenue generated from digital services that rely on the data and content from Canadian users. This may include social media, online marketplaces, advertising, and sale of user data. This would apply to companies with gross revenue of approximately $1.5 Billion.

• Limiting Business Interest Deductions: Starting in 2023, interest deductions would be limited to 40% of profits in first year and 30% in subsequent years. The goal is to curb the “Excessive deductions of interest”

• Increasing Taxation on Smoking: An additional excise duty of $4/carton and new framework for taxation of vaping products to come. • Foreign Homeowners: Introducing a new tax of 1% of the home value to foreign homeowners who leave their Canadian residential properties vacant, charged annually starting January 2022. Annual filing requirements and declaration will be required.

• Health Care System: An additional one-time payment of $4 Billion to help provinces with the clearing the backlogged procedures and treatments due to the pandemic.

• Postdoctoral Fellowship Income: Changing this income type to fit under “Earned Income” to provide for additional RRSP contribution room. A written request to CRA may be considered to adjust this, going back from 2011 – 2020

 

Source: https://www.budget.gc.ca/2021/home-accueil-en.html

DISCLAIMER: The above commentary was provided for information purposes and is not intended to provide legal or tax advice.

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