Budget 2023 focussed on three main priorities:
- Health and Dental Care
- Affordability
- Clean/Sustainable Economy
Here are a few highlights to consider that may impact your financial life plan.
Alternative Minimum Tax (AMT)
The AMT is an alternative method to calculate the income tax you owe in Canada. You must pay AMT if it is more than the Federal tax you calculate in the usual manner. Currently, it is calculated as a flat 15% of the income in excess of a $40,000 threshold. Changes have been proposed to target higher-income individuals who reduce or defer taxes by preferential deductions such as flow-through shares or other deferral mechanisms. The point at which a taxpayer must pay AMT is being raised from $40,000 to approx. $173,000.
Changes include:
- Raising threshold from $40,000 to approx. $173,000
- Increasing capital gains inclusion rate from 80% to 100%
- Including 100% of employee stock options in the AMT base
- Including 30% of capital gains on donations of publicly listed securities
- Disallowing 50% of certain deductions
- Allowing just 50% of non-refundable tax credits against the AMT
- Increasing the AMT rate from 15% to 20.5%
Registered Education Savings Plans (RESPs)
The budget proposes increasing withdrawal limits on RESPs to account for the rise in educational costs. There are restrictions on how much can be withdrawn in respect of the first 13 consecutive weeks of enrollment. It is proposed that these withdrawal amounts will be increased from $5,000 to $8,000 for full-time and $2,500 to $4,000 for part-time programs. It also addresses the ability of separated or divorced parents to set up joint RESPs.
Registered Disability Savings Plans (RDSPs)
Siblings have been added to the list of qualifying family members able to open an RDSP along with parents, spouses, and common-law partners.
Intergenerational Family Business Transfer
Budget 2023 proposed amendments to the previously proposed intergenerational family business transfer designed to make it easier for parents or grandparents to sell their businesses to their adult children. The amendments are meant to ensure only real intergenerational transfers happen.
