Federal Budget: measures affecting individuals

On March 19th, Canada's Minister of Finance, Bill Morneau, tabled his government's budget for 2019-2020. The budget does not include any tax increases, but it does contain numerous fiscal measures affecting individuals and businesses.

Home Buyers' Plan (HBP)

The budget proposes to increase the HBP withdrawal ceiling from $25,000 to $35,000 for withdrawals made after March 19, 2019. A couple can withdraw a total of $70,000 when buying their first home. As of 2020, the budget proposes to expand eligibility for the HBP in the event of a breakdown in a marriage or common-law partnership.

Tax-Free Savings Account (TFSA)

Beginning in 2019, the budget proposes to make the holder of the TFSA jointly and severally liable for the tax payable on the business income earned within the TFSA ("day trading"), limiting the trustee's liability to the property held in the TFSA at that time plus the amount of all distributions from the TFSA as of the date that the notice of assessment is sent.

Registered Disability Savings Plan (RDSP)

Under the current rules, the trustee must generally terminate the RDSP at the end of the year following the first full year in which the beneficiary is not eligible for the Disability Tax Credit (DTC). The budget proposes to eliminate this requirement, along with the obligation to submit a medical certificate confirming that the individual will, in all likelihood, be eligible once again for the DTC in order to keep the plan open. Thus, as of March 19, 2019, issuers are no longer required to close an RDSP if the beneficiary is no longer eligible for the DTC.

Annuities under registered plans

Beginning in 2020, the budget proposes to allow two new types of annuities under registered plans: advanced life deferred annuities, which can be acquired from an RRSP, RRIF, DPSP, PRPP and defined contribution RPP. The start of the annuity can be deferred until the end of the year in which the annuitant reaches age 85; and the variable payment life annuity can be acquired from a defined contribution RPP or PRPP.

Pensionable service under an individual pension plan (IPP)

The budget proposes to prohibit the payment of retirement benefits from an IPP for past years of employment that were pensionable service under a defined benefit plan of an employer other than the employer participating in the IPP (or predecessor employer). Any asset transferred from a defined benefit pension plan of a predecessor employer to an IPP that relates to benefits provided in respect of prohibited service will be considered a non-qualifying transfer that is required to be included in the income of the member for income tax purposes. This measure applies to pensionable service credited under an IPP as of March 19, 2019.

New, refundable Canadian credit for training

The budget proposes the Canada Training Benefit, the main component of which will be the new Canada Training Credit, a refundable credit that will cover up to half the tuition fees and other eligible costs of training. Eligible individuals will be able to bank credit balances of $250 per year--up to a lifetime limit of $5,000--in a notional account they will be able to draw on. Accumulation could start based on eligibility in 2019, and the credit could be used for expenses incurred in 2020.

Change in use rules for multi-unit residential properties

In order for owners of multi-unit residential properties to get the same tax treatment as single-unit property owners, the government proposes allowing all owners to elect not to apply the deemed disposition that usually occurs when part of a property changes use. As a result, the election can provide a deferral of the realization of any accrued capital gain on the property until it is realized on a future disposition. This measure will apply to changes in use of property as of March 19, 2019.

Guaranteed Income Supplement (GIS)

The budget proposes increasing the current $3,500 exemption per year for employment income for recipients of the GIS or Allowance benefits. Starting with the July 2020 to June 2021 benefit year, the increase would:

  • extend eligibility for the earnings exemption to self-employment income;
  • increase the amount of the full exemption to $5,000 per year;
  • introduce a partial exemption of 50% which applies to the amount that exceeds $5,000, up to $15,000 of annual employment and self-employment income.

Canada Pension Plan (CPP)

To ensure that all Canadian workers receive the full value of the benefits to which they contributed, the government proposes to introduce legislative amendments to proactively enroll Canada Pension Plan contributors who are 70 or older in 2020 but who have not yet applied to receive their retirement benefits. That measure does not apply to the Quebec Pension Plan (QPP).

GST/HST related measures

The budget proposes three measures to improve the handling of GST/HST related to health care services provided after March 19, 2019:

  • relief related to supplies and importation of human ova and in vitro embryos;
  • inclusion of podiatrists and chiropodists on the list of practitioners on whose order certain footcare devices can be sold on a zero-rated basis; and
  • exemption with regard to multidisciplinary health services.

Implementation of National Pharmacare

The budget confirms the government's intention to build on the measures proposed in the report tabled in March 2019 on the implementation of National Pharmacare.

Contributions to a Specified Multi-Employer Plan (SMEP) for older members

To bring SMEP rules into line with the pension tax provisions that apply to other defined benefit registered pension plans (RPP), the budget proposes to prohibit contributions to a SMEP in respect of a member after the end of the year in which the member attains 71 years of age. This measure shall apply with regard to contributions to a SMEP made pursuant to collective bargaining agreements entered into after 2019, in relation to contributions made after the date the agreement is entered into.

Taking action to enhance tax compliance in the real estate sector

The budget proposes, starting in 2019, to create new dedicated residential and commercial real estate audit teams to ensure that the sales of principal residences and capital gains derived from real estate sales are adequately reported on tax returns, and that builders of new residential properties remit the appropriate amount of GST/HST.

Other measures

The budget has other measures aimed at individuals, including:

  • dropping the requirement that property be of "national importance" as of March 19, 2019 in relation to increased tax incentives for donations of cultural property;
  • a new temporary, non-refundable tax credit of 15% (12.5% for Quebec residents) for individuals who subscribe to eligible Canadian digital news after 2019 and before 2025, up to $75 per year ($62 for Quebec residents);
  • to reflect current cannabis regulations, cannabis products for medical purposes will be eligible for the medical expense tax credit as of October 17, 2018.
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This document is intended to provide information of a general nature, which is not to be considered as tax advice. Although reasonable measures have been taken to ensure the accuracy of this information, Desjardins does not provide any guarantee of its accuracy.