At the end of March, we hosted a panel of private wealth and tax specialists from BDO Canada to discuss what might be expected from the upcoming Federal Budget. During the discussion and subsequent Q&A, several areas of concern were raised. On April 7th, the 2022-2023 Federal Budget was revealed, and it turned out that the most concerning issues from an a individual investor’s and business perspectives did not come to pass. There were no broad increases to personal or corporate taxes, GST or HST, no new wealth, inheritance or capital taxes, and no increase to the capital gains inclusion rate.

An excellent summary of the Budget published by Deloitte said:

“Notwithstanding continued concern from many in the business community regarding the funding of budget deficits, there were no broad increases to personal or corporate tax rates, no increases in goods and services tax (GST) or harmonized sales tax (HST), and no new taxes on wealth, inheritance or capital. The capital gains inclusion rate remains at 50%.”

However, there were a handful of positive initiatives that may be of interest to our clients, their families, and their entities such as:

First Home Savings Account (FHSA). This new account allows individuals to contribute up to $8,000 per year (and $40,000 over their lifetime), with the contributions being deductible to the taxpayer, income earned in the FHSA being tax-free, and withdrawals for the purchase of a first home being non-taxable. The first contribution is expected to be available in 2023.

A surprise tax break for private businesses. Canadian-controlled private corporations (CCPCs) benefit from a reduced rate of federal tax of 9% (vs.15%) on the first $500,000 of taxable income, which is subject to a full elimination where taxable capital exceeds $15 million. Going forward, the small business deduction will be eliminated when taxable capital exceeds $50 million, although the phase out will continue to start once taxable capital exceeds $10 million.

Higher charitable disbursements. This measure increases the registered charity disbursement quota from the current 3.5% to 5% for the portion of property not used in charitable activities that exceeds $1 million, effective for charities’ fiscal years that begin on or after January 1, 2023.

Click here to download the full budget summary from Deloitte and please be in touch with your Cumberland Portfolio Manager if you have any questions about tax planning as it relates to your wealth management strategy.