The Federal budget has been shared. Here are all the changes in store for Canadians’ taxes.
April 11, 2023
The Federal budget for 2023-2024 was delivered on March 28, 2023, and though there were no changes announced to the personal or corporate tax rates, there were a few new tax measures that might stand out to you.
Here are the biggest things we’ve seen.
The Grocery Rebate.
The Grocery Rebate was created to help lower-to-middle income Canadians to cope with the rising cost of groceries. Similar to the GST/HST credit, Canadians will receive this rebate based on income and will be phased out at a certain threshold. For those who qualify for the full credit, they’re going to receive:
- $153 per adult
- $81 per child
- $81 for the single supplement
But – you’ll need to have filed your 2021 tax return in order to receive this rebate, so get that in as soon as you can if you haven’t yet submitted it!
The Canada Dental Benefit.
In 2022, the government introduced the first iteration of this benefit for uninsured children under 12. Later this year, the government will expand the benefit to uninsured Canadians of all ages with a family income of less than $70,000, with partial benefits for those with a family income between $70,000 and $90,000. Coverage will begin near the end of 2023 and will be administered by Health Canada.
Deduction for tradespeople’s tools.
For those who provide their own tools for their employment, the maximum deduction for tradespeople’s tools has been doubled from $500 to $1,000.
Registered Education Savings Plan (RESP) changes.
People will now be able to withdraw more from their RESP in the Educational Assistance Plan (EAP) during their first 13 weeks of training. Fulltime beneficiaries can now withdraw $8,000 versus the previous $5,000, and part-time beneficiaries can now withdraw $4,000 versus the previous $2,500.
Registered Disability Savings Plan (RDSP) changes.
There was a temporary measure which allowed parents, spouses or common-law partners to open an RDSP for an incapacitated adult (the CRA’s official terminology) that was set to expire at the end of 2023, but it’s now been extended to December 31, 2026.
Adult siblings of an incapacitated adult will also be able to open plans for them during the same extended period.
These rules apply only to those incapacitated adults who don’t have a legal representative.
Alternative Minimum Tax (AMT).
Effective for 2024, the minimum tax structure will be updated and replaced with a new regime. The exemption threshold will be increased from $40,000 to the start of the 29% tax bracket, which is $155,625 for 2022 and projected to be $173,000 by 2024). Seems like a big jump, however, a greater number of people might find themselves facing an increased rate from 15% to 20.5% because they’ve also expanded the types of income and deductions they include in the calculation. Here are a few:
- Capital gains rate has been increased from 80% to 100%
- 100% of the taxable benefit associated with employee stock options is now included in the AMT
- 30% of capital gains on donations of publicly listed securities are now included
Additionally, they’re also eliminating 50% of the following deductions:
- Employment expenses, other than those used to earn commission income
- Deductions for Canada Pension Plan, Quebec Pension Plan and Provincial Parental Insurance Plan contributions
- Moving expenses
- Childcare expenses
- Disability supports deduction
- Deduction for workers’ compensation payments
- Deduction for social assistance payments
- And many more
There are more nuances to this new regime that will vary depending on what types of things people are looking to deduct.
Inter-Generational Transfer of Businesses.
Here’s a strange one – a private member’s bill designed to facilitate the inter-generational transfer of business assets by treating the gain from the sale of shares to corporations owned by children 18 or older as capital gain instead of a deemed dividend, and providing access to the lifetime capital gain exemption, called Bill C-208, also created some unintentional loopholes.
For one, the bill didn’t require the children to be actively engaged in the management of the corporation, so the owners could transfer the accumulated earnings of the corporation to their children on a tax-free basis without them actually carrying on the business.
The amendments require that the child be actively involved in the corporation either immediately or gradually over a 10-year transition period. This is for transactions that occur on or after January 1, 2024.
If you have any questions about when and how to file your taxes, H&R Block Tax Experts are here to help! Find an office near you to book an appointment today.