Budget 2023 proposed a broad array of changes impacting a wide variety of individuals, businesses, charities and other organizations. While there was some speculation, the Budget included no changes to the personal or corporate tax rates, nor to the inclusion rate on taxable capital gains.
After some of our team spent the day in the Budget lockup, the VTN team has come up with this list of ten areas for accountants and small business advisors:
1) Expansion of the Canada Dental Benefit to the Canadian Dental Care Plan, which will cover all individuals without dental insurance, and not just those under the age of 12, by the end of 2023. Benefits will be reduced for families with income over $70,000 and eliminated at income of $90,000 or more.
2) Tripling the size of the File My Return program focused on low and fixed-income individuals by 2025.
3) New and expanded green investment credits (clean hydrogen ranging from 15% to 40%, clean technology manufacturing at 30%, ITC for carbon capture, utilization and storage expansion, clean technology investment expansion). Labour requirements, including wage levels and apprenticeship training opportunities, will need to be met to receive the full credits.
4) RDSP – Qualifying Family Member provisions will be extended until December 31, 2026, and expanded such that a sibling can open the RDSP and be the plan holder.
5) RESP – an increase of the maximum Educational Assistance Payment in the first 13 weeks from $5,000 to $8,000 for full-time students and $2,500 to $4,000 for part-time students. Divorced or separated parents will be able to open joint RESPs for their children.
6) Intergenerational Business Transfers – amendments to ensure that relieving provisions (implemented in Bill C-208 in 2021) will only apply to genuine intergenerational transfers, requiring that one of two sets of conditions be met:
a. immediate business transfer [3 years]; or
b. gradual business transfer [5 to 10 years].
Each transfer will require control by the child, employment of the child and active business continuing through the relevant term. The amendments will apply to transfers on or after January 1, 2024.
7) Introduction of Employee Ownership Trusts to facilitate business sales to employees, to be effective in 2024.
8) Alternative Minimum Tax (AMT) will be modified, with the standard exemption being increased from $40,000 to $173,000 and the rate increased from 15% to 20.5%. Capital gains will be fully included in minimum taxable income (increased from 80%) and many deductions and credits currently allowed for AMT purposes will be reduced. These changes would be effective for the 2024 tax year.
9) A one-time Grocery Rebate will be paid through the GST credit system, in an amount equal to half of the GST/HST credit the individual or family is entitled to (a maximum of $234 for a single individual, or $306 plus $81 per child for a two-parent family).
10) The General Anti-avoidance Rule (GAAR) will be expanded to apply to transactions where one of the main purposes is to obtain a tax benefit, and to add an increased focus on economic substance. A new penalty and extended reassessment period will apply, unless the transaction is disclosed to CRA in the year of the transactions. Budget 2023 announced a consultation ending May 31, 2023.
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