2021 Federal budget – top takeaways
April 21, 2021
2021 Federal budget – Top takeaways
[Soft music plays]
[CIBC logo]
[2021 Federal budget – Top takeaways]
[Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Private Wealth Management]
Jamie: This federal 2021 budget was the first budget we've had in over two years, and all of the stuff that people were worried about - was not in it. So things like the capital gains inclusion rate, a tax on principal residence and a wealth tax, were all absent. So let's take you through what was in the budget and what's relevant to individual Canadians.
First of all, on the personal tax side, we have additional weeks of COVID benefits.
[A store sidewalk sign that reads: “SORRY WE’RE CLOSED DUE TO COVID-19”. A sign in a store window that reads “SORRY WE’RE CLOSED”. A closed restaurant patio, with chairs up on the tables.]
Jamie: So we know that back in February, the government increased the number of weeks that Canadians can receive the Canada Recovery Benefit to a total of thirty-eight weeks - today that was increased by an additional twelve weeks.
[Canada Recovery Benefit (CRB) extended 12 weeks
- Additional $500/week over first four weeks
- Additional $300/week over final eight weeks]
Jamie: So you'll get an additional five hundred dollars per week over the first four weeks. And they're going to drop that to three hundred dollars a week for the remaining eight weeks.
What they've also done is extended the Canada Recovery Caregiver Benefit by an additional four weeks to a maximum of forty-two weeks. Again, that's five hundred dollars a week, in the event that caregiving options, particularly for those who are supporting young children, are not available.
[Canada Recovery Caregiving Benefit (CRCB) extended 4 weeks
- To a maximum of 42 weeks at $500/week]
[A young woman and a disabled child outdoors in a park, smiling at the camera.]
Jamie: One of the things that they've also done is they fixed a technical problem with the repayment of certain benefits. You'll recall that if you didn't qualify for the CERB, you had to repay it and you get a deduction when you repay it. The problem was that if you included the CERB in your income last year, but you didn't repay it until this year, that deduction in 2021 may not be useful to you because you included the amount last year. They've now fixed that,
l who repays the amount of COVID benefits to claim a deduction either in
the year of repayment or in a prior year.
A couple of other things that are worth noting. They are going to be giving a special payment to seniors who are at least seventy-five years of age or over as of June 2022.
[A senior couple, sitting contentedly at a table in their house, going over their finances. A senior man outside at his mailbox, opening his mail.]
Jamie: You're going to get five hundred dollars this August - that's August 2021. In addition, you're going to increase by 10% the amount of OAS that you're going to get for pensioners seventy-five or older starting next July of 2022.
[Increasing Old Age Security (OAS) for Canadians ages 75 and over
- One-time payment of $500 in August 2021
- Increase regular OAS payments by 10% starting July 2022]
Jamie: For students, there's going to be additional interest relief on your student loan extended until the end of March 2023.
[A university student, wearing headphones, studying in a library.]
Jamie: They're going to increase the dollar limit for which you have to start repaying back your student loans from twenty-five thousand up to forty thousand dollars of income. And in an interesting change for post-doctoral fellows who are receiving post-doctoral fellowship income, that income was always taxable, but they're going to now change the definition of earned income so that you can use that income to determine how much you contribute to an RRSP. That's actually going to be retroactive back to 2011, if you write a letter to the CRA.
[Relief for students
- Waiver of interest accrual on Canada Student Loans and Canada Apprentice Loans extended to March 31, 2023
- Increase threshold for repayment assistance from $25,000 to $40,000 (income per year) (for borrowers living alone)
- Postdoctoral fellowship income now considered ‘earned income’ and can be used to determine an individual’s RRSP contribution limit]
Jamie: On the disability side, the government is following the advice of the new report from the Disability Advisory panel, making it a little bit easier for individuals with a mental disability to be able to qualify for the disability credit by improving the eligibility criteria that a person has to meet.
[Improving access to the Disability Tax Credit (DTC)
- Eligibility criteria improved in areas such as mental functions and life-sustaining therapy] Jamie: There's going to be a new luxury tax on cars, boats and airplanes.
[A man stands on the bow of a beautiful yacht, looking across a bay into the sunset.]
Jamie: If your car or airplane is more than one hundred thousand dollars or your boat is more than two hundred and fifty thousand dollars, there will be a new luxury tax starting January 1st of next year. The tax is calculated as the lesser of twenty percent of the value of what you're
buying – it's over one hundred thousand dollars for cars and planes and two hundred fifty thousand for boats - or 10 percent of the value of that car, boat or plane.
[New luxury tax on cars, boats and planes
Lesser of 20% of value above threshold or 10% of the full value]
Jamie: In addition, you might have heard by now of the new tax on unproductive use of Canadian housing by foreign owners.
[An urban lakeshore populated by stylish new condos.]
Jamie: That's sort of the foreign ownership tax, so that will be a one percent tax starting on Jan. 1st 2022, which taxes the fair market value of residential real estate if it's kept vacant. The details of this will be coming in the months ahead. But this is encouraging foreign individuals who are buying Canadian property to either rent it out or they are going to have to pay that tax.
[Tax on unproductive use of Canadian housing by foreign owners
- National, annual 1% tax on vacant or “underused” property owned by non-residents]
Jamie: There was an interesting comment in today's budget for charitable foundations. The government wants to study whether or not it's appropriate for charitable foundations to distribute more each year than they're currently giving under the disbursement quota rules to registered charities. So, again, there's no changes to this as of today, but this could be a change that's coming in the months ahead after public consultations.
There are a number of changes for business owners, including expanding the Canada Emergency Wage Subsidy, introducing a new program called the Canada Recovery Hiring Program, and also expanding the rules for the Emergency Rent Subsidy.
[A café owner leans on a wooden counter, looking pensively at a tablet.] Jamie: Again, these are all detailed in the budget document.
And finally, from a CRA perspective, a couple of things to look at. Number one, CRA is going digital. If you filed your return electronically, either directly or through a tax preparer, the CRA now can send you an electronic version of the notice of assessment without you having to authorize them to do so. They're also moving to electronic signatures on that form, the T183, which is the authorization to file your return electronically with a tax preparer. In addition, the T2200, the ability to work from home - they no longer need a wet signature from an employer to prove that you were working from home.
And finally, the CRA is also cracking down on what they call a “small number of high net worth taxpayers engaging in complex transactions” to avoid the collection of their tax debts by transferring assets to non arm's length people such as a corporation and therefore leaving them without the money to pay the CRA. So there's new anti-avoidance rules coming into place today to combat that. In addition, the budget today is also providing the CRA with two hundred and thirty million dollars over five years to improve its ability to collect outstanding taxes.
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