Finance Minister Chrystia Freeland presented the 2022 Federal Budget to a divided House of Commons on April 7, 2022. The Liberal and NDP parties have recently agreed to a confidence deal, while the remaining parties sit on the sidelines.
Lower than anticipated spending and deficits
This is the Liberal’s first budget since being elected as a minority government. It included spending on key areas like housing, dental care, defence and climate, although overall spending was less than many had expected. It did, however, project deficits until 2027 but these were also less than anticipated and were still lower than the deficits forecasted in December 2021’s Economic and Fiscal Update (EFU).
Projected deficits for the next 5 years
2022 Budget vs 2021 EFU
New tax measures to support first-time home buyers, accessibility and affordability
The most significant tax measures that affected individuals were related to housing. New tax measures, such as the Tax-Free First Home Savings Account and the Multigenerational Home Renovation Tax Credit, were introduced, while others were expanded.
In an attempt to limit residential property flipping and let off some steam from the overheating housing market, a new rule was introduced that would fully tax any profits as business income on the sale of residential homes owned for less than 12 months (with some exceptions). In a similar vein, assignment sales (pre-possession real estate purchases) by individuals of newly built and significantly renovated homes that previously may have been exempt from GST/HST will now be subject to it.
New rules impacting CCPCs
Budget 2022 included a beneficial expansion for businesses subject to the small business deduction (SBD), which lowers the federal tax rate from 15% to 9%. The taxable capital threshold, which currently ranges from $10-$15 million and slowly grinds down the availability of that lower tax rate, has been increased up to $50 million, with a slower grind for taxable capital exceeding 10 million. This will allow medium-sized corporations, which may have had the small business limit ground down to nothing, to partially or even fully get the lower rate.
Canadian-controlled private corporations (CCPCs) that implement tax planning to lower taxes on investment income through the use of foreign jurisdictions will also be impacted by new anti-avoidance rules. Furthermore, the General Anti-Avoidance Rule (GAAR) is being expanded.
There were a significant number of tax measures included in the 2022 budget, with planned further steps on global tax policy alignment and other tax measures that were previously announced. For the small business owner, a key takeaway was that the government intends to bring in new tax legislation that would affect intergenerational transfers of a business. A consultation period will commence, with stakeholders being afforded an opportunity to present their opinions up to June 17, 2022.
Whether you’re a business or a first-time homebuyer, we can help you navigate these changes. Our experts bring together advisory and accounting services to help you maximize your growth potential. Contact us today to book your 1:1 consultation.