On April 19, 2021, the Federal Government released its 2021 Federal Budget, the first Federal Budget since 2019.
Overall, the 2021 budget minimizes short-term tax changes and moves from pandemic emergency response to recovery assistance. The Government announced it will invest more than $101 billion in net new spending over the next three years, including roughly $30 billion over the next five years to build a national childcare system (in the next 18 months there could be a reduction of up to 50 percent in average childcare fees, with a stated goal to drive down costs within five years to just $10 a day per child, nationwide).
The following are highlights that may be of interest to our small business and personal tax clients:
- There are no personal tax or corporate tax rate increases or reductions, with the exception of a proposed 50% corporate tax rate reduction for certain “green businesses”.
- CEWS and CERS programs to be extended for four more periods, ending September 25, 2021. The subsidy rates will gradually decline over the July to September qualifying periods.
- A new Canada Recovery Hiring Benefit (CRHB) will provide eligible employers a subsidy of up to 50% on the incremental remuneration paid to employees between June 6, 2021 and November 20, 2021 (eligible employers can claim either the CRHB or the CEWS for a particular qualifying period, but not both).
- Canada Recovery Benefit and related programs will be extended.
- For individuals who repaid COVID-19 benefits they will be given the option to claim a deduction in respect of the repayment in computing their income for the year in which the benefit amount was received rather than the year in which the repayment was made (previously a benefit amount was only deductible in the year of repayment).
- Many depreciable assets will be eligible for a 100% write-off if purchased on or after April 19, 2021 and put into use before January 1, 2024. There is a $1.5 million limit per associated group, and certain long-term assets, like buildings, are not eligible.
- Expansion of several personal measures, including the Disability Tax Credit, Canada Workers Benefit, the travel component of the Northern Residents Deduction, and Old Age Security.
- A tax on the retail sale of new luxury cars and personal aircraft priced over $100,000, and boats priced over $250,000, will be introduced, effective January 1, 2022.
- Individuals will receive electronic Notices of Assessment where they (or their tax preparer) files their tax returns electronically. Business using My Business Account will default to online mail.
- Proposed tax administration changes include:
- Eliminating the requirement for handwritten signatures on certain forms,
- Allowing issuers of information returns, such as T4As and T5s, to issue income slips electronically without a paper form,
- Requiring most corporations and GST registrants to file GST/HST return electronically,
- Requiring electronic payments for all amounts of $10,000 or more.