On April 7, 2022, the Honourable Chrystia Freeland tabled her second budget as federal Minister of Finance and Deputy Prime Minister.

Previously, the federal government had predicted a deficit for 2021-22 of $154.7 billion, but in today’s budget, this amount was revised down to $113.8 billion. A deficit of $52.8 billion is predicted for 2022-23.

No changes were made to personal or corporate tax rates, nor to the inclusion rate on taxable capital gains.

Some highlights from the Budget are below. Should you wish to discuss the budget matters in the context of your specific situation, please contact us.

Personal Income Tax

  • Tax-Free First Home Savings Account (“TFFS’) – Budget 2022 proposes a new Tax-Free First Home Savings Account that would allow prospective first-time home buyers to save up to $40,000. Like an RRSP, contributions would be tax-deductible and withdrawals used to purchase a first home, including investment income, would be non-taxable, like a TFSA. A number of additional rules apply.
    • The maximum annual contribution is $8,000 (with no carry forward).
    • It was indicated that the ability to combine the Home Buyer’s Plan with the TFFS would not be permitted.
  • First-Time Home Buyers’ Tax Credit increased – Budget 2022 proposes to double the amount for this credit to $10,000 (from $5,000), for a maximum available credit of $1,500.
  • Residential property flipping rule – To ensure profits from flipping properties are fully taxed, Budget 2022 proposed that any person who sells a residential property they have held for less than 12 months would be fully taxed on their profits as business income. Exemptions for “life events” would apply if the sale is for certain reasons, such as a death, disability, the birth of a child, a new job or separation.
    • The government plans to release draft legislation for consultation before finalizing these rules.
  • Home Accessibility Tax Credit increased – Budget 2022 proposes to double the qualifying expense limit of this credit to $20,000, for a maximum tax credit of up to $3,000 for eligible accessibility renovations or alterations.
  • Multigenerational Home Renovation Tax Credit introduced – To support multigenerational families living under one roof, Budget 2022 proposes a new credit that would provide up to $7,500 for constructing a secondary unit for a senior or an adult with a disability.
  • Medical expense credit for surrogacy and other expenses – Budget 2022 extends the eligibility for this tax credit to: medical expenses related to a surrogate mother or a sperm, ova or embryo donor, including expenses reimbursed to a surrogate for in vitro fertilization expenses, certain fees paid to fertility clinics and donor banks in Canada.
  • Medical expense credit for surrogacy and other expenses – Budget 2022 extends the eligibility for this tax credit to: medical expenses related to a surrogate mother or a sperm, ova or embryo donor, including expenses reimbursed to a surrogate for in vitro fertilization expenses, certain fees paid to fertility clinics and donor banks in Canada.

Business Income Tax

  • Small Business Deduction (“SBD”) and Taxable Capital – Budget 2022 proposes that the Taxable Capital threshold is proposed to be increased from $15M to $50M.  This slows down the grind-down of SBD for each additional $1M of taxable capital in excess of $10M.
  • The “Substantive CCPC” concept – Budget 2022 proposes an amendment targeting non-CCPC plans that historically have allowed Canadian private corporations to reduce their corporate tax (by way of avoiding refundable tax on investment income). A transitional rule does allow for transactions that have already occurred.

Indirect tax and other changes

  • Charitable Organizations – Budget 2022 proposes an increase in the disbursement quota for charities from 3.5% to 5%.
  • Assignment Sales – Budget 2022 proposes to make all assignment sales of newly constructed, or substantially renovated, residential housing taxable for GST/HST purposes so that the tax would apply to the total amount paid for a new home by its first occupant.