Compared to the past three years of fireworks released by the Federal Budget, 2019 was tame with the Liberal Government more intent on garnering votes during an election year. The Budget was heavy on Federal spending with more changes on the personal side of taxation as opposed to the corporate. It should come as no surprise that no changes were made to either personal nor corporate rates, but it is disappointing to see that Canada from the perspective of a national tax policy remains largely uncompetitive with our cousin south of the border and that of the world in general.
For those business owners of a Canadian private corporation, there have been no changes to the sweeping legislative amendments from the past three budgets combined, leaving no light at the end of the tunnel. Sadly, there has been no response from the Feds in this Budget, despite numerous calls for a comprehensive tax reform/review, in addressing the possibility of insight to current tax policy. Instead, it has been announced that a further $150 million over the next 5 years will be further injected into the CRA for the procurement of auditors, better computer-based analytics and training. The emphasis was made that there shall be a magnifying glass over crypto transactions and the digital economy, with an additional $65 million pledged to CRA to stay ahead of “non-compliance” schemes driven by advanced technologies. For those heavily invested in crypto, alt coins, and engaged in ICO’s – be afraid.
Staying with the theme of dark storm clouds, the Budget reaffirmed the 2018 Budget announcements in the Federal’s commitment to amend the Canada Business Corporation Act (“CBCA”) to improve transparency on corporate entities to the public and continued strides towards disclosure on trusts and bare trusts. Somewhat of a surprise, was the announcement that employee stock options issued to employees at large companies shall be capped at an annual amount of $200,000. It remains to be seen which entities would qualify as a “large” corporation, thankfully the stock option rules will not change for start-ups or rapidly growing Canadian businesses.
For the most part, good news was reserved for personal taxpayers, journalists and individuals who farm and fish for a living. On the personal front retirees will be allowed to keep more savings tax-free until the age of 85, with expanded annuity choices for registered plans to become available. Incentives for first-time home buyers were rolled out, allowing an eligible individual to withdraw $35,000 from the RRSP Home Buyer Plan and for this to be combined with a spouse/common-law partner’s limit of $35,000 to unlock the potential of $70,000 towards the purchase of a new house. Change in use rules for rental properties are to become more flexible for partial changes in use or multi use properties. On the journalism front, generous measures have been proposed for Canadian media corporations and donors to these entities to promote growth in the sector. Finally, farmers and fishers have been given a special exemption under the Small Business Deduction limit rules to allow claims to use the full deduction where previously in certain circumstances access would have been denied.
Stay tuned for our blog post tomorrow, which will look more in depth at the personal changes and how they are proposed to affect you as the taxpayer.