The budget tabled on March 19 by federal Finance Minister Bill Morneau carries on where the three previous budgets left off, as far as managing the budgetary balance is concerned. Deeming the national debt – which stands at about 30% of GDP – to be within its established guidelines, the government has presented a fourth deficit budget in as many fiscal years and doesn’t seem to consider a balanced budget to be a priority for the next five years.
This recourse to deficit spending may be what has allowed the government to propose a number of new tax measures for individuals.
- To begin with, the government would like to encourage Canadians to develop their careers by acquiring new professional skills. With the new Canada Training Credit, individuals will accumulate a yearly credit balance, up to a lifetime limit of $5,000, that could be used to cover part of the cost of job training. Individuals with an annual income of $147,667 or less (i.e., the third tax bracket) will be eligible and must use their credit balance before the end of the year in which they turn 65. Another training support measure: a new Employment Insurance benefit will now provide four weeks of income support for people taking a training leave from work.
- On another note, one new measure may give business owners an incentive to replace their fleets with zero-emission vehicles. Newly purchased electric battery, plug-in hybrid or hydrogen fuel cell vehicles will now be eligible for a full tax write-off in the year they are put into use. Light-, medium- and heavy-duty vehicles will all be eligible. Note that for passenger vehicles, capital costs will be deductible up to a limit of $55,000 plus tax. Canadian individuals, on the other hand, will be eligible for a purchase incentive of up to $5,000 for electric battery or hydrogen fuel cell vehicles with a manufacturer’s suggested retail price (MSRP) of less than $45,000. Note that, for individuals, hybrid vehicles are not eligible.
- Young high-growth companies and startups that include stock options in compensation packages for key employees may want to talk to their tax specialists about the new rules the government has announced in this area. More details should be forthcoming in the next few months.
- With regard to other specialized financial products, note that if you hold units in mutual fund trusts, it might also be appropriate to consult your tax specialists, since the minister has announced a tightening of the tax rules for this product.
- The government has taken note of the situation of retired people who have significant retirement savings, but are worried about their longevity risk – i.e., the possibility that they will outlive their money. New rules have been announced to allow savings in registered plans to be used to purchase a deferred life annuity that would take effect at an advanced age – 85, for instance – to provide a guaranteed lifetime income from that point on.
- Among the measures intended to allow households to build their financial assets, two in particular are aimed at people looking to buy a first home. The first is an increase in the amount that can be used for this purpose under the Home Buyers’ Plan (HBP): it will now be possible to use up to $35,000 from an RRSP for this purpose (the current limit is $25,000). The provision that will draw the most attention, however, is the new program enabling the Canada Mortgage and Housing Corporation (CMHC) to offer a “shared equity mortgage” as a way of reducing the borrowing costs for a residence. Under this lending program, up to 10% of the cost of buying a home would be shared between the purchaser and the CMHC. The program will be called the “First-Time Home Buyer Incentive.”
- Many Canadians, even those with substantial incomes, have people close to them whose personal finances are more vulnerable, such as aging parents or people with disabilities. If you are in this situation, you might want to learn about the new provisions that could make a difference for such people, and ensure that they take full advantage. In particular, these include an increase in the Guaranteed Income Supplement for seniors who continue to work and improvements to the Registered Disability Savings Plan.
- Finally, if you have a business or home in a remote or rural area and the quality of your Internet connection is a concern, be aware that the government is aiming for 95% of Canadian homes and businesses to have access to Internet speeds of at least 50 Mbps by 2026.
A variety of other measures could be of interest to you, especially if you are in the farming business, where a $3.9 billion support program has been announced. For anything not covered here, don’t hesitate to consult the federal government’s budget website!
The following sources were used to prepare this article:
Department of Finance Canada, Budget 2019, 19 March 2019; TheGlobeandMail.com, Federal budget 2019 highlights: 10 things you need to know, 19 March 2019; ici.Radio-Canada.ca, Budget fédéral 2019, 19 March 2019; lapresse.ca, Budget fédéral, 19 March 2019; Finance et investissement, Budget fédéral 2019, 19 March 2019; les Affaires, Budget fédéral, 19 March 2019 ; Advisor.ca, Federal budget introduces annuities deferred to age 85, 19 March 2019.