2021 Federal Budget Update

After a long break (721 days to be exact), a Federal Budget has been unveiled! Was it what you were expecting? How close were your guesses?

As you may have already heard, there were no corporate or personal income tax rate changes. Nor were there any changes to capital gains inclusion rates, the principal residence exemption, or the introduction of a wealth tax.

We’ve cut to the chase for the tax areas we think you will be most interested in. Just trying to make your day a little easier. And, we’ve had a lot of coffee…


Businesses

1. The CEWS and CERS programs will be extended until September 25, 2021 with a gradual decline in subsidy rates starting on July 4, 2021.

2. A new Canada Recovery Hiring Program will 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. Eligible employers can claim CEWS or the hiring subsidy for a qualifying period, but not both.

3. After April 19, 2021, CCPCs are able to immediately expense certain capital expenditures provided they are put into use before 2024. Perfect time to buy some new equipment! Who doesn’t love a 100% deduction?

4. Additionally, the budget proposes to update CCA classes for investments in specific clean energy generation and energy conservation equipment. Qualifying property will be eligible for accelerated CCA rates of 30% and 50%, depending on classification.


Individuals

1. COVID 19 benefit repayments (i.e. CERB, CRB) can now be reported as a deduction in your personal tax return in either the year you received the benefit or the year you repaid the benefit (previously they could only be deducted in the year you repaid the benefit).

2. The Disability Tax Credit definition for mental functions related to everyday life for 2021 and later years has been expanded. Please review the broadened criteria in case you may be eligible. The earlier these can be registered with CRA, the better!

3. Watch for a one-time $500 top-up payment in August 2021 to OAS recipients 75 and older who faced extra pandemic costs. And, a promise, those same seniors will receive a 10% increase in OAS payments as of July 2022.


New Taxes

1. Tax on luxury goods – a new luxury tax on vehicles and aircrafts over $100,000 and boats over $250,000, effective January 1, 2022 has been proposed. More details will follow in coming months.

2. Tax on vacant residential properties – consultation for an annual 1% tax on the value of non-resident, non-Canadian owned residential real estate, effective January 1, 2022 has also been announced.


*Our very limited summary of the Federal Budget has focused on the areas where you have expressed concerns. There are further tax items such as: anti-avoidance rules, digital services tax and interest deductibility restrictions that may be applicable for you.

Is there a topic you have more questions on? Or something you saw in the Budget that we didn’t highlight, let us know. Always good to hear from you. Maybe someday soon, we can do that over coffee again. Those were good days.

Need help navigating the changes? That’s what we’re here for!