On Monday, April 19, 2021, Minister of Finance Chrystia Freeland released the 2021 Canadian federal budget. This is very likely the last budget before the next federal election. The minority Liberal government proposed measures encouraging support from other parties and included something for almost every potential voter.

The budget focused significantly on child care, with proposals to reduce child care costs by 50% by the end of 2022, with a target of $10 per child per day by 2026.

Employee measures were another area, including a proposed $15 per hour federal minimum wage and extension of EI Sickness benefits from 15 to 26 weeks.

Perhaps the most significant tax measures were the speculated changes not in the budget. Potential increases in capital gains tax, widespread wealth tax measures and an increase to the GST rate were not part of the budget proposal.

Some key tax-related measures proposed include:

  • Extensions to Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS), and Lockdown Support to September 25, 2021, but at decreased rates beginning July 4, 2021.
  • Introduction of a new Canada Recovery Hiring Program of up to 50% of payroll for new hires or increased hours for existing employees (more details below).
  • They allow Canadian-controlled private corporations (CCPCs) to expense up to $1.5 million capital asset purchases annually (more details below).
  • Up to $5,000 per apprentice for small and medium-sized employers to cover costs of first-year apprenticeship.
  • Increases to Old Age Security (OAS) for those 75 or older, including a one-time payment of $500 in August 2021 and a 10% increase beginning July 2022.
  • The Government introduced GST/HST registration and collection requirements for non-resident vendors involved in e-commerce in the Fall Economic Statement 2020.
  • Income from Zero-Emission Technology Manufacturing or Processing taxed federally at half-rates (4.5% to 7.5% rather than 9% to 15%).
  • Annual 1% tax on the value of vacant or underused residential property owned by a non-resident, non-Canadians. This tax begins January 1, 2022, with details and potential exceptions not yet determined.
  • Imposing a luxury tax beginning January 1, 2022, on new passenger vehicles and aircraft (valued over $100,000), along with new personal use boats (valued at over $250,000). This tax will be 10% of the full value or 20% of the value over the threshold ($100,000 or $250,000), whichever is less.

Canada Recovery Hiring Program

The Canada Recovery Hiring Program will be implemented for 4-week periods from June 6 to November 20, 2021. The amount will be 50% for periods up to August 28, then 40%/30%/20% for the following 4-week periods. Like CEWS, eligible employers will generally be the same as those eligible for CEWS, and this program will require similar revenue decline conditions to be eligible. This program should not overlap with CEWS – higher of the amounts (this program or CEWS) will be available for a period, not both.

To encourage investment in capital assets, CCPCs are allowed increased tax depreciation for some purchased assets after April 19, 2021, and available for use on or before December 31, 2023. This additional write-off of up to $1.5 million annually will not be available for certain classes of depreciable assets (Classes 1 through 6, 14.1, 17, 47, 49, 51), which will generally exclude buildings, fences, paving, goodwill, and quota as examples. The $1.5 million annual limits will be shared among an associated group of CCPCs, and certain restrictions, such as the limits for energy property and rental, still apply. The $1.5 million annually will be in addition to regular tax depreciation for previously purchased assets, assets in excluded classes, or new purchases over the limit. 

The Accelerated Investment Incentive providing increased tax depreciation in the year of purchase will continue to apply.

All in all, this budget has a wide variety of spending with a strong indication that this Government views deeper deficits and ballooning debt as necessary means to address the impacts of COVID-19 in Canada.

 

Read more about how recent relief programs could impact you.