This article was reviewed by Chris Singer, CFP®.
Finance Minister Chrystia Freeland tabled the 2021 Federal Budget on April 19, 2021. What’s not in this budget is probably more interesting than what is. No increase in the capital gains inclusion rate, no change to the principal residence exemption, no family wealth tax, no income tax rate increases for individuals or corporations.
Here are some of the highlights from the 700 page 2021 proposed budget:
- Luxury Tax
Budget 2021 proposes to introduce a luxury tax, which will come into force on January 1, 2022. This luxury tax would apply to new luxury vehicles and aircraft priced over $100,000 and boats priced over $250,000. This would apply on both purchases (both outright and financed) and leases, with the seller or lessor being responsible for remitting the full amount of the federal tax owing. Further, GST/HST would be applicable to the final sale price, inclusive of the proposed luxury tax. Luxury vehicles include most new passenger vehicles over the threshold amount, but with some carve-outs, such as motorcycles, snowmobiles, and motor homes/RVs.
- Old Age Security
The government proposes to increase the Old Age Security (OAS) benefits for seniors age 75 and older in two ways. First, individuals who will be 75 or over as of June 2022 will receive a one-time payment of $500 in August of this year. Secondly, as of July 2022, OAS payments for pensioners 75 and over will increase by 10 per cent on an ongoing basis. This will provide additional benefits of $766 to full pensioners in the first year and be indexed to inflation going forward.
- Child Care
The federal government will work towards the goal of bringing fees for regulated child care down to $10 per day on average within the next five years. Furthermore, by the end of 2022, the government is aiming to achieve a 50 per cent reduction in average fees for regulated early learning and child care to make it more affordable for families. These targets would apply everywhere outside of Quebec, where prices are already affordable through its well-established system.
- COVID Benefits
There have been some extensions made to the Canada Recovery Benefit (CRB) and Canada Recovery Sickness Benefit (CRSB) benefits.
- Disability Tax Credit (DTC)
The Budget proposes to expand the list of mental functions necessary for everyday life to ensure that the eligibility criteria for the DTC is better articulated.
- Vacancy Tax
The Budget proposes a 1 per cent tax on the value of non-resident, non-Canadian-owned residential real estate considered to be vacant or underused. This tax would be levied annually beginning in 2022 and more details are coming. This would be in addition to any Provincial taxes already in place.
One highlight from the 700 page 2021 proposed budget:
- Canada Recovery Hiring Program (CRHP)
A program for eligible employers that continue to experience qualifying declines in revenues relative to before the pandemic so that they can hire new employees.
One of the takeaways from the budget in 2021 was the following statement: “If you’ve been lucky enough, or smart enough, or hard-working enough, to afford to spend $100,000 on a car, or $250,000 on a boat – congratulations! And thank you for contributing a little bit of that good fortune to help heal the wounds of COVID and invest in our future collective prosperity. Those who can afford to buy luxury goods can afford to pay a bit more.”
Full details are contained in the Budget
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