Challenging environment
On April 19, almost two years after the tabling of the last federal budget, Chrystia Freeland, federal Minister of Finance, tabled her first budget in a context where the COVID-19 pandemic continues to rage and still imposes many restrictions on economic development.
Among the various measures proposed, a few particularly drew our attention in terms of their relevance to our professional clientele. We discuss them below.
IF YOU ARE IN BUSINESS: ACCELERATED CAPITAL COST ALLOWANCE
Announced measure: immediate expensing for certain capital property
Capital property purchased is normally eligible for a capital cost allowance spread over several years, depending on the class of property.
Following the federal budget announcements, several classes of property acquired after April 19, 2021 and put into use before January 1, 2024 may be expensed immediately.
- This assistance applies to CCPCs (Canadian-Controlled Private Corporations).
- In the short term, this measure reduces the tax burden for companies that purchase equipment necessary for their activities.
- The classes of property subject to this new rule include, among others, machinery or equipment used for manufacturing and processing. This measure could prove useful to incorporated professionals who require such equipment to practise.
LUXURY GOODS TAX
Announced measure: introduction of a tax on the retail sale of new luxury cars, personal aircraft and new boats
- Vehicles and aircraft priced over $100,000 will be subject to an additional tax equal to the lesser of 10% of the full value of the vehicle or the aircraft, or 20% of the value above $100,000.
- The following vehicles purchased for personal use are exempt from the application of this new tax:
- Motorcycles, all-terrain vehicles and snowmobiles.
- Racing cars that are not street legal and are owned solely for on-track or off-road racing.
- Recreational vehicles.
- Boats priced over $250,000 will be subject to a tax equal to the lesser of 10% of the full value of the boat or 20% of the value above $250,000.
OTHER ANNOUNCEMENTS
Measures of general interest
- Extension until September 2021 of certain COVID-19 assistance programs such as the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS). These extensions are, however, accompanied by measures aimed at gradually reducing the rates of these subsidies beginning July 2021.
- Introduction of a Canada Recovery Hiring Program to provide a subsidy to employers who have suffered a drop in income. This program will provide them with a subsidy covering up to 50% of the remuneration paid to their eligible employees between June 6, 2021 and November 20, 2021.
- Annual tax on vacant properties
- Effective January 1, 2022.
- Annual tax of 1% on the value of non-resident, non-Canadian owned residential real estate that is considered to be vacant or underused.
- Harsh penalties for failure to file the necessary forms.
- One-time payment of $500 in August 2021 for OAS (Old Age Security Pension) beneficiaries aged 75 and over.
- Proposal to increase the OAS pension by 10% beginning in 2022 for beneficiaries aged 75 and over – to be continued.
- Minimum hourly wage of $15 for federally chartered companies.
2021-2022 PROVINCIAL BUDGET RECAP
The Québec government tabled its budget in March. This year, the federal and provincial budgets are not in any way complementary. A brief recap of the Legault government’s budget measures that are of particular interest to professionals:
/ An increase in the Small Business Deduction (SBD) rate.
/ A change in the tax credit rate for ordinary dividends for individuals.
/ No interest on student loans for a period of one year.
You can read our article on this budget.
Still the pandemic…
Obviously, all these announcements are made in a low policy rate, high-deficit environment. The strength of the economic recovery is on everyone’s mind and the new measures are designed to support it.
If you have any questions regarding the impact of these measures on your personal or business finances, don’t hesitate to contact your advisor, who will be pleased to discuss them with you. Your fdp team is there for you, ready to guide you towards the best financial decisions.
Anik Bougie, LL.M. Fisc., F. Pl., TEP
Practice Leader, Financial Planning and Taxation
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.
