Budget Announcement:
The 2023 Federal Budget released March 28th was relatively tame compared to the big-spending COVID relief measures of the last few years. There were no widely applicable tax increases or savings to most Canadians. The Finance Minister did her best to walk a fine line of providing support to lower income individuals and families and incentives to targeted sectors and industries. The 2023 Federal Budget keeps government spending down to avoid adding to recent inflation trends, but not so low as to push the economy towards a recession and decreased employment. How successful this balancing act will be can only be measured with time. The full detail of the Department of Finance release and Budget documents is linked below but we’ve summarized what we feel are the more relevant portions for Virtus clients.
Individuals:
One time “Grocery Rebate”:
This rebate will increase the GST Credit entitlement already calculated for 2023. Qualifying families and individuals will receive a payment of double their January 2023 GST Credit payment, up to $153 per adult with up to $81 per child or for the single supplement. The payment is to be distributed “as soon as possible” once the legislation is passed. People not entitled to the GST credit already would not receive any benefit.
Tax-Free First Home Savings Account (TFHSA):
First announced in Budget 2022, financial institutions will be able to open TFHSAs as of April 1, 2023. Maximum of $8,000 per year in tax-deductible contributions that will be tax-free on withdrawal for purchasing your first home.
Expanding Canadian Dental Program:
With $13B over 5 years to provide coverage for families with income under $90,000 in 2023 and forward.
Increase in Registered Education Savings Plan:
Eligible withdrawals increased to $8,000/yr for full time students, and $4,000 for part time students. Effective immediately with ability to access additional funds in 2023 if previous maximum already withdrawn this year.
Doubling Tradesperson Tool Deduction:
Deduction is increased to $1,000 for personal purchase of tools required for select occupations. Starting in 2023 tax year.
Changes to Alternative Minimum Tax:
Effective January 1, 2024 there will be a new calculation intended to have this refundable tax apply in more situations in years of high income or gains from select sources.
Businesses:
New tax on public company equity buy backs:
Effective January 1, 2024, 2% tax of net equity repurchased by most publicly traded companies, REITs and SIFT trusts or partnership.
Restrictions on eligibility for intergenerational transfers of family businesses:
Effective January 1, 2024, the creation of two sets of additional criteria to be met in order for the selling parents to access the tax-free Capital Gains Exemption when selling to select family members.
Significant tax credits for investors and businesses in “clean” sectors:
New credits for clean electricity and clean manufacturing and processing, expanding/extending existing credits for clean hydrogen, clean technology, zero-emission tech, carbon capture, utilization and storage.
New Critical Mineral Extraction and Processing Tax Credit:
There will be an expansion of Flow-Through Shares and Critical Mineral Exploration eligibility.
Expansion of rules related to Employee Ownership Trusts:
The new rules coming into effect January 1, 2024, will allow employees and business owners to facilitate purchase of the business in a tax-efficient manner for both sides.
As further Federal Budget analysis is completed and the Finance Department distributes more information, we will continue to update our findings. Please contact your Virtus representative with any questions or to discuss how the Budget might apply to your situation.
