Please find a brief outline of the Liberal Government’s Budget released March 28, 2023.

SMALL BUSINESS & TAX

1. TAX RATES

Some very positive news was the absence of any personal or corporate tax rate increases, as well as the inclusion rate of taxable capital gains remaining at 50%.

2. CLEAN ENERGY TRANSITION

The budget has introduced Investment Tax Credits (ITCs) ranging from 15% to 40% of capital investments related to “clean energy transition”, including clean hydrogen, clean technology manufacturing, and carbon capture. Full ITCs are contingent upon certain wage levels and apprenticeship training opportunities being met.

3. INTERGENERATIONAL BUSINESS TRANSFERS

These tax deferred plans need to be “genuine”, and not just a “freeze” of value. The children receiving the growth shares must “control” the business, and be gainfully employed by the continuing business.

4. EMPLOYEE OWNERSHIP TRUSTS

The budget introduced EOTs to facilitate business sales from owners to employees.

5.ALTERNATIVE MINIMUM TAX (AMT)

AMT typically results from claiming certain significant tax exemptions, generally only available to high-income  individuals. The budget proposes to apply AMT at higher rates, and reduce credits and exemptions.

FAMILY SUPPORT

1.GROCERY REBATE

This one-time cash payment will be applicable for those persons presently receiving the GST/HST credit, and will be paid through this system.  It is calculated as 50% of the current GST/HST credit received by the individual or family.  The maximum payment is $234 for an individual, and $306 plus $81 per child for a two-parent family.

2. CANADIAN DENTAL CARE PLAN

The CDCP covers all individuals without dental insurance and is applicable for families earning up to $70,000.  The coverage declines with increased family income and is eliminated for families with annual income of $90,000 or more.

3. REGISTERED EDUCATION SAVINGS PLAN

The budget introduces changes to permit $8,000 (formerly $5,000) Educational Assistance Payments (income earned within and government grants made to the RESP) withdrawals for full-time students ($4,000 for part-time students). Divorced and separated parents can now open joint RESP’s for their children.

4. FIRST HOME SAVINGS PLAN

This was introduced in the Spring 2022 budget, and is not technically part of the March 2023 budget … but worth mentioning just the same, as they are going to be available to be set up this year.  The FHSP permits an annual contribution of up to $8,000, with a maximum of $40,000 over 5 years. The benefit is that the contributions are tax-deductible (like an RRSP), while all withdrawals (contributions and income earned) are tax-free (like a TFSA) provided they are used to purchase the individual’s first residential dwelling.

BY THE NUMBERS

1.The 2022-23 annual deficit is projected to be $43 Billion, which is $6 Billion greater than was projected in November 2022.

2. Annual deficits are projected in each of the next five years, with the Federal Debt increasing another $200 Billion by 2027-28.

3. The increased deficits result entirely from elevated spending, largely related to “energy transition” and “health care” initiatives.

4. Minor changes to Alternative Minimum Tax, dividends received by financial institutions, and Global Minimum Tax will produce a modest increase in revenues.

5. Public Sector “efficiency savings” are anticipated to slightly offset the increased spending (when was the last time the government became more efficient?)

This means that the Federal Government is attempting to keep up with our friends to the South with increased incentives to invest in the “clean energy transition”.  Numerous companies are entering this business, and the Government is trying to ensure said companies have a financial reason to invest their capital in Canada rather than in the US or Europe.  In the meantime, the grocery rebate and the dental coverage will provide some relief for families who need it.  And we can relax with stable tax rates … for now!