Setting up a My Business Account with the CRA
A My Business Account gives directors, officers, and partners access to their corporate taxes, GST, and payroll accounts online. Follow these steps to set up a My Business Account with CRA.
Having a My Business Account with the CRA will make your tax life much easier. Whether you’re looking to review outstanding balances or expected refund amounts, check your past returns or add information to your account, My Business Account is the one place where you can do it all.
Once you have set up your My Business Account, you will be able to:
- Update any information related to your business (name, address, banking information, etc.)
- View and file GST returns, payment transactions and GST instalment schedules
- View T slips that were filed and transactions made
- View notices of assessment for corporate tax returns filed and any account transactions and balances
What You Need For Setting Up A My Business Account
Setting up a My Business Account with the CRA is a straightforward process, but you will need your CRA business number and your program account identifiers (GST/HST, payroll, corporation income tax, exercise tax and others) to complete the registration process.
In addition, you will have to provide some personal information, including your social insurance number (SIN), postal code, date of birth and information from a previously filed personal income tax return.
Follow these simple steps to register for your CRA My Business Account.
- Navigate to the CRA’s sign in services webpage and select “My Business Account” from the list of services.
- Scroll down the page to “Option 2 – Using a CRA user ID and password” and select “CRA register.”
- Enter your SIN and click next to continue.
- Enter your postal code, date of birth, and the requested tax information from a previously filed tax return. Click next to continue.
- Confirm that the mailing address CRA has on file for you is correct before selecting next to continue.
- Create a CRA user ID consisting of 8 to 16 characters, no more than 7 digits, no spaces, and no special characters except: dot (.), dash (-), underscore (_), and apostrophe (‘).
- Create a password consisting of 8 to 64 characters with at least 1 upper-case letter, 1 lower-case letter, and 1 digit. No spaces, accented character or special characters except: dot (.), dash (-), underscore (_), and apostrophe (‘) will be accepted.
- Select and provide the answers to five security questions.
- Enroll in mandatory multi-factor authentication by selecting your preferred method (telephone or passcode grid).
- Enter your business number.
- Review and agree to the terms and conditions of use by entering your password and selecting “I agree.”
- Registration is now complete until you receive your security code in the mail. Once you do, log in to My Business Account using the CRA user ID and password created in steps 6 & 7 and enter the code when prompted.
- Review and agree to the My Business Account terms and conditions of use.
- You will now have full access to My Business Account.
Note: Internal accountants and employees (that are not officers) should not use the My Business Account system but are welcome to create a CRA RepID and access the company’s information using the Represent a Client system.
When you work with Avisar CPA, you can authorize us as your representative with the CRA through your My Business Account.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Federal Budget 2023: Other Measures
Small Business Credit Card Fees
Budget 2023 announced that commitments had been obtained from Visa and Mastercard to lower fees for small businesses. More than 90% of credit card-accepting businesses are expected to see their fees reduced by up to 27%.
Automatic Tax Filing for Low-income Canadians
Budget 2023 announced that the number of Canadians eligible for CRA’s automatic File My Return service will be increased to 2 million by 2025, almost tripling the number of currently eligible Canadians. In 2022, 53,000 returns were filed using this service. In addition, a new pilot project will be implemented to assist vulnerable Canadians in applying for benefits even if they do not file tax returns.
Student Benefits
Budget 2023 proposes increasing Canada student grants by 40%, raising the interest-free Canada student loan limit from $210 to $300 per study week, and waiving the requirement for mature students (aged 22 or older) to undergo credit screening in order to qualify.
Dental Care for Canadians
The Canadian dental care plan would provide coverage for all uninsured Canadians with an annual family income of less than $90,000 (the Canada dental benefit only provided benefits for children under 12) by the end of 2023. The plan will be administered by Health Canada with support from a third-party benefits administrator. Benefits are reduced for families with income between $70,000 and $90,000.
Protecting Federally Regulated Gig Workers
Budget 2023 proposes to amend the Canada Labour Code to strengthen prohibitions against employee misclassification for federally regulated gig workers such that they will receive protections and benefits including EI and CPP.
Ensuring the Integrity of Emergency COVID-19 Benefits
Budget 2023 proposes to provide $53.8 million in 2022-23 to Employment and Social Development Canada to support integrity activities relating to overpayments of COVID-19 emergency income supports.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Federal Budget 2023: Personal Measures
Alternative Minimum Tax (AMT) for High-Income Individuals
Individuals will owe AMT if the tax amount calculated under the AMT regime is greater than the tax calculated under the ordinary progressive tax rate regime. Under the current rules, the calculation of AMT allows fewer deductions, exemptions and tax credits than under the ordinary income tax rules and applies a flat 15% tax on income over a standard $40,000 exemption.
Budget 2023 proposes several changes to the AMT calculation. First, the AMT rate is proposed to increase from 15% to 20.5%.
Second, the exemption would increase from $40,000 to the start of the fourth tax bracket (for 2024 this is approximately $173,000). Third, the AMT base would be broadened by further limiting tax preferences (i.e., exemptions, deductions and credits) as follows:
- The capital gains inclusion rate would increase from 80% to 100%.
- 30% of capital gains eligible for the lifetime capital gains exemption would be included.
- Deductions of capital loss carry forwards and allowable business investment losses would apply at a 50% rate.
- 100% of employee stock options benefits would be included.
- 30% of capital gains on donations of publicly listed securities would be included.
- Only 50% of many deductions would be allowed, including the following: employment expenses (other than those incurred to earn commission income); moving expenses; child care expenses; interest and carrying charges incurred to earn income from property; northern residents deduction; and non-capital and limited partnership losses of other years.
- Only 50% of non-refundable tax credits historically allowed for AMT purposes would be allowed.
The ability to recover AMT in the seven subsequent years, to the extent that tax computed under the ordinary progressive tax rate regime exceeds AMT, is not proposed to change.
The proposed changes would come into force for the 2024 personal tax year.
Grocery Rebate
Individuals and families with modest incomes receive the Goods and Services Tax Credit (GSTC). The maximum 2022/2023 GSTC is $467 for a single person, and $612 plus $161 per child for a married or common-law couple. Budget 2023 proposes a one-time payment called the Grocery Rebate which will equal half of the annual maximum (twice the quarterly payment received in January, 2023) to be paid as soon as possible after the legislation is passed.
Deduction for Tradespeople’s Tool Expenses
Under the current law, a tradesperson can claim a deduction of up to $500 of eligible new tools acquired in a taxation year as a condition of employment. Budget 2023 proposes to double the maximum employment deduction for tradespeople’s tools from $500 to $1,000, effective for 2023 and subsequent taxation years. As a consequence of this change, extraordinary tool costs that are eligible to be deducted under the apprentice vehicle mechanics’ tools deduction would be those costs that exceed the combined amount of the increased deduction for tradespeople’s tool expenses ($1,000) and the Canada employment credit ($1,368 in 2023) or 5% of the taxpayer’s income earned as an apprentice mechanic, whichever is greater.
Registered Education Savings Plans (RESPs)
Government grants and investment income can be withdrawn from RESPs as an education assistance payment (EAP) when a beneficiary is enrolled in an eligible post-secondary program. These withdrawals are taxable.
Under the current law, beneficiaries that are full-time students cannot withdraw more than $5,000 in EAPs in respect of the first 13 consecutive weeks of enrollment in a 12-month period. For part-time students, the limit is $2,500 per 13-week period. Budget 2023 proposes to increase these limits to $8,000 for full-time students and $4,000 for part-time students.
Budget 2023 also proposes to enable divorced or separated parents to open joint RESPs for one or more of their children or to move an existing joint RESP to another promoter. Under the current law, only spouses or common-law partners can jointly enter into an agreement with an RESP promoter to open an RESP.
These changes would come into force on Budget Day.
Registered Disability Savings Plans (RDSPs)
Where the contractual competence of a person with a disability who is 18 years of age or older is in doubt, the RDSP plan holder must be that person’s guardian or legal representative. A temporary measure allowed the person’s parent, spouse or common-law partner (a “qualifying family member”) to open an RDSP and be the plan holder where the person does not have a legal representative.
Budget 2023 proposes to extend this measure by three years, to December 31, 2026. Budget 2023 also proposes to broaden the definition of qualifying family members to include a brother or sister of the beneficiary who is 18 years of age or older. Qualifying family members who become a plan holder before the end of 2026 could remain the plan holder after 2026.
These proposals would apply as of royal assent of the enacting legislation.
Retirement Compensation Arrangements (RCAs)
An RCA is type of employer-sponsored arrangement that generally allows an employer to provide supplemental pension benefits to employees. A refundable tax is imposed at a rate of 50% on contributions to an RCA trust, as well as on income and gains earned or realized by the trust. The tax is generally refunded as the retirement benefits are paid to the employee. The employer receives a full deduction for contributions made to the RCA.
Employers who do not pre-fund supplemental retirement benefits through contributions to an RCA trust and instead settle retirement benefit obligations as they become due, can obtain a letter of credit (or a surety bond) issued by a financial institution in order to provide security to their employees. To secure or renew the letter of credit, the employer pays an annual fee or premium charged by the issuer. These fees and premiums are subject to the 50% refundable tax.
Budget 2023 proposes that fees or premiums paid for the purposes of securing or renewing a letter of credit (or a surety bond) for an RCA that is supplemental to a registered pension plan will not be subject to the refundable tax. This change would apply to fees or premiums paid on or after Budget Day.
Budget 2023 also proposes to allow employers to request a refund of previously remitted refundable taxes in respect of such fees or premiums paid in prior years. They would be entitled to recover 50% of retirement benefits paid after 2023, to a maximum of the refundable taxes paid in the past.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Federal Budget 2023: Previously Announced Measures
Budget 2023 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release.
- Legislative proposals released on November 3, 2022 with respect to Excessive Interest and Financing Expenses Limitations and Reporting Rules for Digital Platform Operators.
- Tax measures announced in the Fall Economic Statement on November 3, 2022, for which legislative proposals have not yet been released, including: automatic advance for the Canada workers benefit; investment tax credit for clean technologies; and extension of the residential property flipping rule to assignment sales.
- Legislative proposals released on August 9, 2022, including with respect to the following measures:
- borrowing by defined benefit pension plans;
- reporting requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs);
- fixing contribution errors in defined contribution pension plans;
- the investment tax credit for Carbon Capture, Utilization and Storage;
- hedging and short selling by Canadian financial institutions;
- substantive Canadian-controlled private corporations;
- mandatory disclosure rules;
- the electronic filing and certification of tax and information returns;
- Canadian forces members and veterans amounts;
- other technical amendments to the Income Tax Act and Income Tax Regulations proposed in the August 9th release; and
- remaining legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax, excise levies and other taxes and charges announced in the August 9th release.
- Legislative proposals released on April 29, 2022 with respect to hybrid mismatch arrangements.
- Legislative proposals released on February 4, 2022 with respect to the Goods and Services Tax/Harmonized Sales Tax treatment of cryptoasset mining.
- Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
- The transfer pricing consultation announced in Budget 2021.
- The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
- Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Surviving a CRA Audit: What You Should Know
It’s the letter you never want to receive from the Canadian Revenue Agency (CRA). You are subject to a CRA Audit.
The CRA sends thousands of letters every year to notify people that they’re being subjected to an audit. Of all the returns they receive, it’s usually business taxes that they take a fine-tooth comb to. This is unfortunate because business owners and entrepreneurs are often swamped with numbers, and the last thing they have time for is to parse through each one.
If you want the best chance of successfully getting through a CRA audit, we’ll look at how they decide who to investigate, what you can do to prepare, what’s going to happen, and what your accountant should be doing in the meantime.
Risks for a CRA Audit
The biggest risk for being selected for a CRA audit is the size of your business. The majority of the CRA audit program spending is devoted to small and medium-sized businesses. When they run through all of the numbers, here’s what they’re looking for:
- Discrepancies: Officials are looking for gaps and glaring margins between the reports. For instance, if your reported income is different than the average reported income in prior years, this could be a red flag for the CRA. Or if your income is far higher than the norm in your industry, this may trigger the next step.
- Deductions: Sometimes just claiming home office deductions, which can include utilities, insurance, and property taxes, can be enough to have the CRA send you a letter. Because many people will claim these expenses when they aren’t explicitly used for the business, many of the write-offs don’t qualify. You may also face an audit if you’re making a lot of charitable donations or medical expenses.
- Cash: Dealing with a lot of cash in a business opens the path to fraud because it’s notoriously difficult to track. This is doubly true if you’re reporting loss after loss in a cash-heavy business.
- Family: There are plenty of business owners out there who will take advantage of their familial connections to make it easier to pay their taxes. So while plenty of people will employ family members without breaking the rules, you may be flagged simply for having a child or spouse on the books.
How the CRA Audit Process Works
The first step is a CRA auditor contacting you (usually by mail or by phone). They’ll give you specifics of the auditing process and then conduct an on-site audit at the place of business. The auditor is generally looking at the following paperwork:
- Tax returns, perhaps and organizational chart or property details, depending on the nature of the audit.
- Ledgers, invoices, receipts, contracts, bank statements.
- Records of other individuals or entities not being audited (e.g., partnerships, corporations, spouses, common-law partners, etc.)
The records looked at will include those for your place of business but also your personal records as well. They’ll also look at any adjustments made by your bookkeeper or accountant to ensure that they were all completed according to tax law.
By the end of a CRA audit, the auditor will either declare your filing to be a correct assessment, which means that your case is complete and your audit will be closed. Or they may conclude that you either owe additional taxes or that you’re entitled to a refund.
What You Can Do to Prepare For A CRA Audit
The best way to prepare is by organizing all your records and ensuring that there’s concrete evidence to justify your numbers and answer any questions. This can include anything from invoicing history to physical receipts. The CRA requirement is to keep your records for at least seven years before shredding them, though CRA will generally audit within three years of your return being filed.
You can also consider gathering proof for regional shifts in supply and demand for your industry. For instance, if you’ve taken several losses over the course of your business, you may be able to point to general trends that have pushed down revenue among all of your competitors. However, these records are not to be shown to the auditor unless specifically asked for. Simply having them at the ready can help give you a sense of confidence as you move into the proceedings.
In addition, when you’re getting ready to speak to the auditor, make sure that you’ve given some thought about what you want to address with them. Generally, less is more and answer what is asked of you. You should be friendly but also thorough when asking about anything from due dates to expectations. It’s common for people to get flustered when they’re talking to an official from the CRA — even when they haven’t done anything to be nervous about. When the auditor is working with you, they should get the sense that you have nothing to hide.
The Role of Your Accountant During A CRA Audit
A CRA audit can be difficult for many reasons, particularly if you’re a busy business owner who doesn’t have a lot of bandwidth to organize, catalog, and verify every last record. When you have a good accountant on your side, they can help you manage the process from beginning to end. Accountants stand between you and the auditor, making it easier to handle the questions and produce the paperwork they need to close the case.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Tax Changes for Filing Your 2022 Tax Return
Like many years, Tax Year 2022 comes with several changes you need to know about when filing your personal and business taxes. Understanding the tax changes for 2023 filing is critical to reducing the risk of overpaying your taxes. The following are some of the most important changes Canadians must know about heading into tax filing season.
Repayment of COVID-19 Benefits
Those who received COVID-19 benefits in 2022 from CRA, such as any of the following, are likely to receive a T4A slip to report these benefits on tax returns:
- Canada Recovery Benefit (CRB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Sickness Recovery Benefit (CSRB
Those with a net income after adjustments higher than $38,000 from the CRB will need to repay some or all of the benefits they received. For those who repaid all or some of those benefits in 2022, it is possible to claim the tax deduction in the year you desire (when received or when repaid).
Updated Basic Personal Amount
The Basic Personal Amount (BPA) was adjusted to $14,398 for 2022. As a result, you may see a slight boost in your tax return for the year. In 2023, the BPA will increase to $15,000.
Shifts in Federal Tax Brackets
For the tax year 2022, the federal tax brackets are as follows:
- Up to $50,197 income: 15%
- From $50,197 to $100,392: 20.5%
- From $100,392 to $155,625: 26%
- From 155,625 to $221,708: 29%
- Above $221,708.01: 33%
Be sure to adjust and plan for any tax changes this year based on your income. The upward adjustment of these tax brackets means that some people may see a shift from a lower tax bracket to a higher one compared to last year’s filing.
Work-From-Home Expenses
As so many people have transitioned to working from home, the government has worked to carry over the work-from-home tax credit first put in place in the previous year. That means Canadians who have expenses from working from home and keep documentation of those costs can now claim up to $500 in those expenses on their income taxes. If you did not calculate this, you can use a $2 per day flat rate for each day you worked at home.
First-Time Home Buyers’ Tax Credit
The First-Time Home Buyers’ Tax Credit is on its way up. The HBTC aims to make it more affordable for Canadians to purchase a home. For the tax year 2022, if you purchased a home, you can now claim $10,000 as a non-refundable income tax credit on your taxes. That is twice as much as it was in the year prior. That could provide up to a $1,500 tax savings for some people.
Change in Old Age Security Income Limits
Another update for the tax season this year is a change in Old Age Security income limits. Seniors who make more than what is allowable may have to pay some of their OAS back to the government. For the 2022 tax year, the new limits are:
- $80,761, the minimum income recovery threshold
- $134,626, the maximum recovery threshold for those between the ages of 65 and 74
- $137,331, the maximum recovery threshold for those over the age of 75
If you made more than the minimum amount, you might need to repay some of your OAS. However, your OAS might be cancelled if you made more than the maximum amount listed here.
TFSA Limited Increases
Tax-free savings account limits have also increased for the tax year 2022 to $6,500.
Air Quality Improvement Tax Credit
Another federal change to note is the Air Quality Improvement Tax credit. Businesses that made suitable ventilation upgrades under this credit can claim 25% up to $10,000 can be made in 2022. That provides up to a $2,500 tax credit.
Labour Mobility Deduction
For those who work as apprentices, tradespeople, or employees in the construction industry, the Labour Mobility Deduction (LMD) will allow for claims for meals and lodging expenses. This applies when those in this field must move to a temporary location to work in the industry.
RRSP Dollar Limit Increase
The Registered Retirement Savings Plan (RRSP) dollar limit for 2022 is $29,210. You cannot, however, go beyond 18% of your earned income from the previous year.
For more tips on retirement planning, we recommend checking out this post.
Consult an Accountant to Ensure You’re Filing Properly
With the changes occurring in income tax returns for 2023, be sure to set up a consultation with your accountant to discuss any that may affect you. That helps ensure you are compliant and take full advantage of all potential deductions. If you’d like to discuss these changes with us, just book a free consultation.
Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
Federal Budget 2022: Personal Measures
Tax-Free First Home Savings Account (FHSA)
Budget 2022 proposes to create the tax-free FHSA to help first-time home buyers save up to $40,000 for their first home. Contributions to an FHSA would be deductible (like an RRSP), and income earned in an FHSA and qualifying withdrawals from an FHSA made to purchase a first home would be non-taxable (like a TFSA).
The lifetime limit on contributions would be $40,000, subject to an annual contribution limit of $8,000. Unused annual contribution room would not be carried forward. Individuals would also be allowed
to transfer funds from an RRSP to an FHSA tax-free, subject to the $40,000 lifetime and $8,000 annual contribution limits.
Withdrawals for purposes other than to purchase a first home would be taxable. However, an individual could transfer funds from an FHSA to an RRSP (at any time before the year they turn 71) or a RRIF on a non-taxable basis. Transfers would not reduce, or be limited by, the individual’s available RRSP room. Withdrawals and transfers would not replenish FHSA contribution limits.
Individuals would not be permitted to make both an FHSA withdrawal and a home buyers’ plan withdrawal in respect of the same qualifying home purchase.
If an individual has not used the funds in their FHSA for a qualifying first home purchase within 15 years of opening an FHSA, their FHSA would have to be closed. Any unused funds could be transferred into an RRSP or RRIF or would otherwise have to be withdrawn on a taxable basis.
Eligibility
Individuals eligible to open an FHSA must be at least 18 years of age and resident in Canada. In addition, they must not have lived in a home that they or their spouse owned at any time in the year the account was opened or the preceding four calendar years.
Effective Date
The government would work with financial institutions to allow individuals to open an FHSA and start contributing in 2023.
Home Buyers’ Tax Credit
First-time home buyers can obtain up to $750 in tax relief as a non-refundable tax credit by claiming this credit. Budget 2022 proposes to double the Home Buyers’ Tax Credit amount, such that tax relief of up to $1,500 can be accessed by eligible home buyers. This measure would apply to acquisitions of a qualifying home made on or after January 1, 2022.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit is a non-refundable tax credit that provides relief of up to $1,500 on eligible home renovations (15% of expenses of up to $10,000) to make the dwelling more accessible to seniors or those eligible for the Disability Tax Credit that reside in the property. Budget 2022 proposes to double the annual expense limit to $20,000, such that the maximum non-refundable tax credit would be $3,000. This measure would apply to expenses incurred in the 2022 and subsequent taxation years.
Multigenerational Home Renovation Tax Credit
Budget 2022 proposes a new refundable tax credit to support constructing a secondary suite for an eligible person to live with a qualifying relation. An eligible person would be a senior (65+ years of age at the end of the tax year when the renovation was completed) or an adult (18+ years of age) eligible for the disability tax credit. A qualifying relation would be 18+ years of age and a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person (which includes the spouse or common-law partner of one of those individuals).
This tax credit would provide tax relief of 15% on up to $50,000 of eligible expenditures, providing a maximum benefit of $7,500.
Qualifying Renovation
The renovation must allow the eligible person to live with the qualifying relation by establishing a secondary unit (which must have a private entrance, kitchen, bathroom facilities and sleeping area). The secondary unit could be newly constructed or created from an existing living space that did not already meet the requirements to be a secondary unit. Relevant building permits for establishing a secondary unit must be obtained, and renovations must be completed in accordance with the laws of the jurisdiction in which the eligible dwelling is located.
One qualifying renovation would be permitted to be claimed in respect of an eligible person over their lifetime.
The credit would be claimed in the year that the qualifying renovation passes a final inspection, or proof of completion of the project according to all legal requirements of the jurisdiction in which the renovation was undertaken is otherwise obtained.
Eligible Expenses
Eligible expenses would include the cost of labour and professional services, building materials, fixtures, equipment rentals and permits. Items such as furniture and items that retain a value independent of the renovation (such as construction equipment and tools) would not qualify for the credit.
Goods or services provided by a person not dealing at arm’s length with the claimant would not be eligible unless that person is registered for GST/HST. All expenses must be supported by receipts.
Expenses would not be eligible for this credit if claimed as a medical expense tax credit and/or home accessibility tax credit.
Eligible Claimants
The credit may be claimed by the eligible person, their spouse, or a qualifying relation that resides in or intends to reside in the dwelling within 12 months of the renovation. A qualifying relation that owns the dwelling can also make a claim.
Where one or more eligible claimants claim in respect of a qualifying renovation, the total of all amounts claimed for the renovation must not exceed $50,000.
Eligible Dwelling
An eligible dwelling must be owned by the eligible person, their spouse, or a qualifying relation. Within twelve months of the renovation, the eligible person and the qualifying relation must also ordinarily reside or intend to reside in the property.
Effective Date
This measure would apply for the 2023 and subsequent taxation years, in respect of work performed and paid for and/or goods acquired on or after January 1, 2023.
Residential Property Flipping Rule
The government is concerned that taxpayers are inappropriately reporting gains on the disposition of real estate acquired for resale at a profit. In these cases, the profit is fully taxable as business income (100% taxed), and not a capital gain (50% taxed, and potentially eligible for the principal residence exemption).
Budget 2022 proposes to introduce a new rule that all gains arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be business income.
The new deeming rule would not apply if the disposition related to one of the life events listed below:
- Death: due to, or in anticipation of, the death of the taxpayer or a related person;
- Household addition: due to, or in anticipation of, a related person joining the taxpayer’s household or the taxpayer joining a related person’s household (e.g. birth of a child, adoption, care of an elderly parent);
- Separation: due to the breakdown of a marriage or common-law partnership;
- Personal safety: due to a threat to the personal safety of the taxpayer or a related person, such as the threat of domestic violence;
- Disability or illness: due to a taxpayer or a related person suffering from a serious disability or illness;
- Employment change: for the taxpayer or their spouse or common-law partner to work at a new location or due to an involuntary termination of employment. In the case of work at a new location, the taxpayer’s new home must be at least 40 kms closer to the new work location;
- Insolvency: due to insolvency or to avoid insolvency; and
- Involuntary disposition: a disposition against someone’s will, for example, due to expropriation or the destruction or condemnation of the taxpayer’s residence due to a natural or man-made disaster.
Properties held for more than 12 months, or meeting one of the exceptions noted above, would continue to generate either business income or a capital gain on the disposition, depending on whether the property was acquired for the purpose of resale at a profit (business income) or was acquired for some other purpose (capital gain). While this measure was reflected as a “personal income tax measure,” it is unclear whether the deeming rule will also apply to corporations and other taxpayers.
The measure would apply in respect of residential properties sold on or after January 1, 2023. The government indicates that there will be a consultation when the legislation is drafted.
Labour Mobility Deduction for Tradespeople
Budget 2022 proposes a deduction of up to $4,000/year to recognize certain travel and relocation expenses of workers in the construction industry.
An eligible individual would be a tradesperson or an apprentice who temporarily relocates to enable them to obtain or maintain employment under which the duties performed are temporary in a construction activity at a particular work location. Prior to the relocation, they must also ordinarily reside in Canada, and during the relocation period, at temporary lodging in Canada near that work location.
The temporary lodging must be at least 150 kms closer than the ordinary residence to the particular work location. The particular work location must be located in Canada, and the temporary relocation must be for at least 36 hours.
Eligible expenses would include reasonable amounts for:
- temporary lodging for the eligible individual near the particular work location; and
- transportation and meals for the individual for one round trip between the temporary lodging and where the individual ordinarily resides.
The maximum deduction would be capped at 50% of the worker’s employment income from construction activities at the particular work location in the year. Amounts could be claimed in the tax year before or after the year they were incurred, provided they were not deductible in a prior year.
The individual’s ordinary residence must remain available to them during the period that they are in the temporary lodging.
Expenses for which the individual received non-taxable financial assistance could not be claimed. Amounts claimed under this deduction would not be eligible under the existing moving expense deduction and vice versa.
This measure would apply to the 2022 and subsequent taxation years.
Medical Expense Tax Credit (METC) for Surrogacy and Other Expenses
Budget 2022 proposes to expand access to the METC in cases where an individual relies on a surrogate or a donor to become a parent. Medical expenses paid by the taxpayer, or the taxpayer’s spouse or common-law partner, with respect to a surrogate mother or donor would be eligible for the METC, whereas previously they would generally not have been eligible. For example, expenses paid by the intended parent to a fertility clinic for an in vitro fertilization procedure with respect to a surrogate mother or for hormone medication for an ova donor would be eligible for the METC.
Budget 2022 proposes to allow reimbursements paid by the taxpayer to a patient to be eligible for the METC, provided that the reimbursement is for an expense that would generally qualify under the credit. For example, the METC could be available for reimbursements paid by the taxpayer for expenses incurred by a surrogate mother with respect to an in vitro fertilization procedure or prescription medication related to their pregnancy.
Budget 2022 also proposes to allow fees paid to fertility clinics and donor banks to obtain donor sperm or ova to be eligible under the METC. Such expenses would be eligible where the sperm or ova are acquired for use by an individual to become a parent.
All expenses claimed under the METC would be required to be incurred in Canada and in accordance with the Assisted Human Reproduction Act and associated regulations.
These measures would apply to expenses incurred in the 2022 and subsequent taxation years.
Amendments to the Children’s Special Allowances Act and to the Income Tax Act
Budget 2022 proposes several amendments to ensure that the Children’s Special Allowance, the Canada Child Benefit and the Canada Workers Benefit amount for families are appropriately directed in situations involving Indigenous governing bodies. These measures would be retroactive to 2020.
Other Personal Measures
Budget 2022 also proposes a number of measures for individuals for which few details were provided, including the following:
- Dental care would be funded, starting for children under age 12 in 2022, expanding to children under age 18, seniors and disabled individuals in 2023, with full implementation by 2025. Full coverage would be provided for families with under $70,000 of annual income and no coverage would be provided for families with income of $90,000 or more.
- The government intends to continue working towards a universal national pharmacare program, including tabling a Canada Pharmacare bill and working to have it passed by the end of 2023.
- A one-time $500 payment would be made to those facing housing affordability challenges. Timing, eligibility and delivery method are to be announced at a later date.
- The Incentives for Zero-Emission Vehicles program that has offered purchase incentives of up to $5,000 for eligible vehicles since 2019 would be extended until March 2025. Eligibility would be broadened to include more vehicle models, including more vans, trucks and SUVs. Further details will be announced by Transport Canada in the coming weeks.
- Budget 2022 announces the government’s commitment to examine a new alternative minimum tax regime, with details on a proposed approach to be released in the 2022 fall economic and fiscal update.
