Welcome to the first week of April! The weather has started getting a little warmer and spending more time outside seems very appealing once again.

 

Last week the Federal Government released their 2023 budget and there was certainly some interesting changes. Overall the government seemed to take a barbell approach focusing on imposing more taxes on the highest income earners while trying to support lower income earners through a grocery rebate. There was some support for middle-income earners as the First Home Savings Account is now officially available at some institutions, and a small adjustment to the RESP withdrawal rules. 

 

For lower income earners, the grocery rebate may provide some relief but it seems unlikely to cover the entirety of the impact of inflation on grocery prices, especially for families. While the grocery rebate will have an impact, and some change is better than no change; we imagine many Canadians will be asking why this program wasn't strengthened more. Experts question efficacy of promised grocery rebate

 

The Alternative Minimum Tax is one of the lesser known parts of the Canadian tax system and is designed to ensure higher income earners aren't able to reduce their income tax to very low levels. The AMT calculation runs in parallel to the ordinary tax calculation and has fewer deductions, exemptions, and credits.  As our own Jamie Golombek puts it, the goverment has "broadened the base" on the AMT calculation.

 

The First Home Savings Account has officially come into existence and is a combination of the RRSP and TFSA. Like an RRSP you can contribute to a First Home Savings Account ($8,000 per year up to $40,000 in total contributions). Like a TFSA, any withdrawals are tax-free. We highly recommend that anyone over the age of 18 who hasn't owned a home in the last five years open an account as soon as possible - even if they can't fully fund it right away.  Here is the Government of Canada's website about FHSA's.

 

RESPs have a minor updating allowing larger withdrawals in the first 13 weeks of a program, increasing the limit from $5,000 to $8,000. It should be noted that once a student has passed the first 13 weeks (ie the first semester) the withdrawal limits are much larger. 

 

There are some other smaller changes in store as well:

-RDSPs are getting an extension on what was a temporary measure, allowing "qualifying family members" to open an RDSP

-Intergenerational share transfer rules have been tightened further

-Not an actual change per se, just an indication that Employee Ownership Trusts which would allow employees to purchase a business without requiring them to pay directly as they normally would to acquire shares.

 

If you have questions about the Federal Budget, or it's impact on you, please give me a call

 

Cheers, 

Peter Galbraith - Investment Advisor, CFP

613-531-2922

peter.galbraith@cibc.com