On April 19, 2021, the federal government presented Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience. This is the first budget since 2019, and the first budget to be delivered by Deputy Prime Minister and Finance Minister, Chrystia Freeland.
This budget introduces record levels of spending, in an effort to support Canada’s economic recovery from the COVID-19 pandemic, promote a greener economy, and drive Canadian innovation. It includes continued spending on pandemic-related support programs including extensions to existing programs, as well as the introduction of new programs to assist individuals and businesses.
The deficit for the 2020-2021 fiscal year was $354.2 billion, while next year’s deficit is forecasted at $154.7 billion.
The budget has proposed to extend the The Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy & Lockdown Support (CERS) until September 25, 2021. The changes include extensions and gradual phase-outs of the subsidies, as well as eliminating eligibility for employers with a revenue decline of 10% or less. The following changes, extensions and phase-outs are proposed for pandemic economic support programs.
The Canada Emergency Wage Subsidy (CEWS)
The proposed extension will leave the existing subsidy rate for period 17 (June 6-July 3, 2021), meaning $847 per week for businesses. The maximum weekly benefit will gradually decrease to 60% in period 18, 40% in period 19, and 20% in period 20. The budget has also proposed alternative baseline remuneration periods for employees that do not deal within an arm’s length of the employer, starting June 6, 2021.
Canada Emergency Rent Subsidy & Lockdown Support (CERS)
The CERS was introduced for qualifying tenants and property owners in October 2020. The proposed extension leaves the existing subsidy rates for period 17 (June 6-July 3, 2021), with phaseout beginning in period 18 with a reduction to 60%, followed by 40% in period 19 and 20% in period 20. After July 4, 2021, employers must have a revenue decrease greater than 10% in order to qualify. Lockdown support will be extended to September 25, 2021, at the existing rate of 25%.
Canada Recovery Hiring Program (CRHP)
The budget proposes a new alternative to CEWS, to provide eligible employers with a subsidy of up to 50% on incremental remuneration paid to employees starting period 17 (June 6, 2021-July 3, 2021), as well as a maximum of $1,129 of eligible remuneration per week. The subsidy will remain at 50% for periods 17-19, then reducing to 40% in period 20, 30% for period 21, and 20% for period 22. The CRHP is available to the same taxpayers that are eligible for CES, however, an employer can only claim one of either CHRP or CEWS. Canadian-controlled private corporations (CCPCs), individuals, not-for-profit organizations, and registered charities are considered eligible employers.
Funding Programs for Small and Medium Sized Businesses
The budget also includes the introduction, expansion or extensions of programs & initiatives that support Canadians and Canadian businesses including:
Regional Relief and Recovery Fund & Indigenous Business Initiative
Canada Digital Adoption Programs
Canada Small Business Financing Program
Corporate income tax reduction for zero-emission technology manufacturers
Expansion to the definition of clean energy equipment that will receive accelerated Capital Cost Allowance
Immediate write-off eligible property for CCA
Digital Services Tax (DST) extension
Amendments to registration and revocation rules applicable to charities
Increasing annual disbursement quotas for charities
Extension of film or video production tax credits (CPTC or PSTC)
Support for employers hiring skilled tradespeople through apprenticeship opportunities
Support for temporary foreign workers
Tax incentive for Carbon Capture, Utilization, and Storage (CCUS) projects
The budget purposes new investments in Early Learning & Child Care and Indigenous Early Learning & Child Care to reduce the average fees by 50% in all provinces other than Quebec, bring fees for regulated child care down to $10/day by 2025/26, increase the quality of affordable child care spaces, and expand before and after school programs.
Minimum Wage of $15/hr
A proposed federal minimum wage of $15/hr, rising with inflation, which will apply to workers in the federally regulated private sector- including industries such as baking, telecommunications and airlines, and others. This will not affect provinces and territories where wages are higher.
Recovery Benefits & EI Regular Benefits
A proposed increase of 12 additional weeks of the Canada Recovery Benefit (CRB) to a maximum of 50 weeks, beginning with the maximum of $500/week for the first four additional weeks, followed by $300/week for the remaining 8 weeks. The Canada Recovery Caregiver Benefit is also proposed to extend an additional 4 weeks, at a maximum of 42 weeks. Changes to the EI system surrounding benefits, severance, vacation and sick pay, are also being proposed.
Old Age Security
Provides pensioners who will be age 75 and older as of June 2022 with a one-time additional payment of $500 in August 202, as well as an increase in regular Old Age Security payments for pensioners 75 and over by 10% on an ongoing basis as of July 2022.
Tax on Vacant Resident Properties Held by Non-residents
An annual 1% tax on the value of non-Canadian owned residential real estate that is considered to be vacant or underused, effective January 1, 2022. All owners of residential property in Canada (other than Canadian citizens or permanent resident of Canada) must file an annual declaration for the prior calendar with CRA for each Canadian residential property they own starting in 2023.
Disability Tax Credit (DTC)
Expands the DTC by updating the list of mental functions used to assess the credit, to include mental functions for everyday living. It also proposes to expand the calculation of time spent on extensive life sustaining therapy and would reduce the minimum required frequency of therapy from three times a week to two times a week. The proposed changes would apply to 2021 and subsequent tax years.
Luxury Goods Tax
Cars, and personal aircraft worth over $100,000, and boats over $250,000 will be subject to an additional luxury sales tax. The tax is the lesser of 20% of the value above the threshold, or 10% of the full value of the car, boat or aircraft. GST/HST will apply to the final sales price, on top of the luxury tax. Luxury tax applies as of January 1, 2022.
Green Home Loans
Proposal to provide homeowners with up to $40,000 in interest-free loans to undertake a complete “deep home retrofit,” upon undergoing an authorized EnerGuide energy assessment of their home, in an effort to make homes more energy efficient and improve the environmental impact.
Postdoctoral Fellowship Income
Postdoctoral fellows are currently not considered students, so their income does not qualify for the scholarship exemption from income tax. While it is fully subject to tax, it does not currently qualify as “earned income” for the purpose of determining the Registered Retirement Savings Plan (RRSP) contribution limit. Proposed changes would include this income as “earned income” for RRSP purposes.
Student Debt Relief
Proposal to waive the requirement to pay interest on Canada Student and Apprentice Loans up to March 31, 2023. Additionally, to provide more help to lower-income borrowers, by increasing the income threshold eligible to receive repayment assistance, from $25,000 to $40,000.
Electronic Filing and E-signatures
Elimination of the requirements for handwritten signatures on certain forms, to allow issuers of information returns, such as T4As and T5s, to issue income slips electronically without a paper form. It would also require that most corporations and GST registrant file GST/HST returns electronically.
Increased CRA Funding
Proposal to provide the CRA with more resources to combat aggressive tax planning, protecting taxpayers’ privacy and modernizing its services. It is estimated that these additional measures to combat tax evasion would recover $810 million in revenues over five years.