Budget 2022: What Does it Mean for Me?

by | Apr 30, 2022 | Featured, Industry Updates, Tax Planning & Preparation

Budget 2022 Canada

The Federal budget 2022 focussed on several important factors for Canada’s immediate recovery needs and future growth. The government highlighted 3 broad areas.

  1. Making Life More Affordable for Canadians
  2. Economic Growth and Innovation
  3. A Clean Economy

There are pros and cons to the budget that will be different for everyone. After considering some of the following highlights, what items will you assign to your “pros” column?

 

General Budget 2022 Highlights

  • $56 Billion in new spending is proposed over the next six years
  • The ratio of federal debt to GDP is projected to decline to 41.5% in 2026/27, down from more than 45% currently
  • $5.3 Billion for a national dental program for low-income Canadians, including children and seniors
  • $10 Billion is ear-marked to make housing more affordable with support for Canada Mortgage and Housing Corporation, affordable housing units, renovation tax credits, and a tax-free first home savings account
  • $7.5 Billion for climate initiatives like greener buildings and neighbourhoods, electric vehicle mandates, charging infrastructure, and credits for investments in “green technology” to reach net-zero emissions by 2050
  • $6.1 Billion is dedicated to increased defense spending
  • $10.6 Billion to support reconciliation with Indigenous peoples and provide health, social and educational services to First Nations youth, water treatment, and housing
  • Corporate income tax raised from 15% to 16.5%, a surtax on banking profits over $1 Billion for the 2021 tax year, and an 18% tax rate on profits over $1 Billion
  • Phasing out of the small business tax rate and introduction of a dedicated trust vehicle to encourage employee ownership at small businesses
  • A review of cryptocurrency and stablecoins focused on financial sector stability and security

 

Budget 2022 Personal Income Tax Highlights

 

Tax-Free First Home Savings Account (FHSA)

The FHSA would be a savings vehicle for first-time home buyers modeled after the Tax-Free Savings Account. The lifetime contribution limit of the FHSA would be $40,000 with an $8,000 annual contribution limit starting sometime in 2023. The FHSA would not be able to be used with the Home Buyers’ Plan.

 

Home Buyers’ Plan (HBP)

The HBP allows the withdrawal of up to $35,000 from an RRSP to purchase or build a home with no tax penalty. This program continues to be available, but the HBP and FHSA withdrawals cannot be used together.

 

Doubling Home Buyers’ Tax Credit (HBTC)

A proposal to double the amount of the HBTC to $10,000 for qualifying first-time homebuyers. This would provide up to $1,500 in tax relief which can be split with spouses or common-law partners. The increase would be applied to a home purchased on or after January 1, 2022.

 

Increase to Home Accessibility Tax Credit

The home accessibility tax credit was introduced in 2016 to help seniors and people with disabilities modify their homes. Budget 2022 proposes to double the qualifying expense limit to $20,000. Accessibility renovations would provide a tax credit of up to $3,000.

 

Multigenerational Home Renovation Tax Credit

This tax credit makes provisions for people to add a secondary dwelling for a family member who is a senior or person with a disability. The proposed benefit would allow for 15% of expenses to be recovered up to $50,000 starting in 2023.

Anti-Flipping Tax

If this proposal is implemented, a property sold within 12 months of purchase will be considered a house flip. Profits from the sale would be taxed as business income. The tax would come into effect for properties sold on or after January 1, 2023.

 

Labour Mobility Deduction for Tradespeople

Tradespeople needing to relocate for employment may be eligible to claim up to $4,000 a year for relocation and travel expenses.

 

Medical Expense Tax Credit (METC) for Surrogacy and Other Expenses

The METC is a non-refundable tax credit for people with above-average medical or disability-related expenses. Eligible expenses currently include reproductive technologies. Budget 2022 proposes to further expand the criteria to include expenses related to reimbursement of expenses to a surrogate mother or sperm, ova, or embryo donor.

 

Flow-Through Shares

Flow-through share agreements help mining companies raise money to fund eligible exploration and development initiatives. These agreements allow corporations to “flow-through” specific expenses to investors who in turn deduct the expenses against their taxable income.

The Mineral Exploration Tax Credit (METC) provides an additional income tax benefit to flow-through investors. The credit is equal to 15% of the exploration expenses incurred.

Budget 2022 proposes to eliminate flow-through share agreements for oil, gas, and coal exploration agreements entered into after March 31, 2023.

 

New Critical Mineral Exploration Tax Credit (CMETC)

Budget 2022 also proposes to introduce a new 30% tax credit for exploration expenses incurred for the advancement of clean technology. Eligible minerals include copper, nickel, lithium, cobalt, graphite, rare earth elements, scandium, titanium, gallium, vanadium, tellurium, magnesium, zinc, platinum group metals, and uranium. The CMETC would generally follow the same rules as the METC. The CMETC would apply under eligible flow-through share agreements entered into after budget day and on or before March 31, 2027.

Source Tax Measures: Supplementary Information | Budget 2022

Do you have questions? Contact us.

The information in this commentary is for informational purposes only and not meant to be personalized financial planning advice. The content has been prepared by the team at Fraser & Partners from sources believed to be accurate.

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